Tech Shares Lead Major Indexes Higher Again
April 01 2021 - 12:02PM
Dow Jones News
By Joe Wallace and Paul Vigna
U.S. stocks resumed a familiar pattern Thursday, with tech
shares rising sharply and outpacing the rest of the market.
The Nasdaq Composite rose 1.4%, following a 1.5% gain on
Wednesday. The S&P 500 was up 0.8%, after the broad stocks
gauge closed out a fourth consecutive quarterly advance on
Wednesday, while the Dow Jones Industrial Average was up 0.4%.
Many investors are hopeful that stocks will continue to climb in
the second quarter. Their optimism is pegged to the prospect of a
surge in economic growth amid widespread vaccinations, fresh
spending programs from the Biden administration and earnings
expectations. Still, they point to risks stemming from rising bond
yields, new lockdowns in Europe and signs of excess in corners of
the market.
A year ago stocks rose sharply in expectation of an economic
rebound, said Shawn Snyder, a strategist at Citi U.S. Wealth
Management. Now that it appears to be here, investors have "Covid
jitters," he said, looking warily at inflation expectations and,
ultimately, a reversal of Federal Reserve policy.
"We're exiting this Goldilocks situation [for stocks] and
wondering if the porridge is too hot," he said.
Some are questioning whether this year's rotation out of
technology stocks and into economically sensitive sectors like
banks and energy has gone too far. Having powered the broad market
higher in 2020, the rally in tech stocks slowed in the first
quarter as investors bought into companies that stood to benefit
from the economic rebound.
That thinking was evident Thursday morning.
"We are entering a period of time when there is a bit more risk,
and for that I want to have a more balanced approach," said Lars
Skovgaard Andersen, investment strategist at Danske Bank Wealth
Management. Mr. Andersen thinks information-technology stocks such
as Microsoft and Salesforce.com would provide a cushion if cyclical
stocks lose momentum.
On the economic front, new claims for jobless benefits edged up
to 719,000 last week from 658,000 the previous week, data from the
Labor Department showed. Economists had expected unemployment
claims -- a proxy for layoffs -- to decline. The figures are
closely followed by investors seeking to gauge the pace of the
economic rebound.
The Institute for Supply Management's March survey of purchasing
managers at U.S. factories was better than expected, showing
another solid month for new orders, output and employment. The
March PMI came in at 64.7, higher than the projected 61.7.
That is another welcome sign for the economy. On Wednesday,
President Biden unveiled a $2.3 trillion infrastructure plan
centered on fixing roads and bridges, expanding broadband internet
access and boosting funding for research and development.
Semiconductor producers and others stand to benefit from President
Biden's infrastructure package, Mr. Anderson said.
Shares of electric vehicle makers got a boost Thursday, with
Tesla, Nikola and Materialise rising.
In corporate news, shares of Micron Technology rose 5% after The
Wall Street Journal reported that the memory-chip maker was
exploring a potential deal for Japan's Kioxia. Western Digital --
which the Journal also reported to be circling the Japanese
semiconductor company -- gained 4.8%.
The yield on 10-year Treasury notes slipped to 1.679% from
1.749% Wednesday. Yields posted their biggest one-quarter rise
since 2016 in the first three months of the year, unsettling tech
stocks whose valuations had been plumped up by low interest
rates.
Thursday's moves bolstered investors who think yields are
unlikely to keep rising at the same pace.
"The bond market has adjusted now and is at the level
appropriate for the coming inflation," said Hans Peterson, global
head of asset allocation at SEB Investment Management. "Bond
volatility is going down, which is part of feeling more confident
in seeing the opportunity in growth stocks."
Oil prices wavered after a meeting of ministers from members of
the Organization of the Petroleum Exporting Countries and its
partners, led by Russia, got under way. U.S. crude rose 0.8% to
$59.68. Analysts expect the cartel to keep significant output cuts
in place to bolster the oil market after a recent slide in
prices.
In overseas markets, the Stoxx Europe 600 rose 0.6%, led by tech
and real-estate stocks. Moving in the other direction, shares of
Atos slid 13% after the French IT company said its auditors had
found issues that caused accounting errors at two U.S.
subsidiaries.
China's Shanghai Composite Index and Japan's Nikkei 225 both
rose 0.7%.
Write to Joe Wallace at Joe.Wallace@wsj.com and Paul Vigna at
paul.vigna@wsj.com
(END) Dow Jones Newswires
April 01, 2021 11:47 ET (15:47 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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