By Anna Hirtenstein
Surging technology stocks boosted the Nasdaq Composite, putting
it on track for a fresh record, while shares of pandemic-sensitive
companies slid amid fears of disruption to coronavirus vaccine
supplies.
The Nasdaq jumped 1.2% in morning trading on Monday, adding to
last week's gains that led the index to notch a record at the end
of last week. The S&P 500 rose 0.2%, while the Dow Jones
Industrial Average fell 0.7%.
"You're getting rotation out of the more cyclical stocks. These
big tech stocks are perceived as a bit of a haven trade," said
Michael Hewson, a chief markets analyst at CMC Markets. "There's
also talk of disruptions to vaccine supply, so we'll likely have
slower vaccine rollout and tighter restrictions for longer. What
we're seeing is a recovery deferred, or delayed."
Pharmaceutical giant Merck scrapped its plans to develop a
Covid-19 vaccine after trials yielded disappointing results,
pulling a major player out of the coronavirus vaccine race and
sending its shares down 0.8%. This came after AstraZeneca warned on
Friday that its vaccine deliveries to the European Union would lag
projections.
Meanwhile, investors were focused on a big week for corporate
earnings, expected to show which corporations are thriving and
which are struggling amid the Covid-19 pandemic.
More than one-fifth of the broad S&P 500 index and a third
of Dow components are scheduled to release earnings this week.
Starbucks, Verizon and Microsoft are slated for Tuesday. Other
major tech firms are reporting later in the week, including Apple,
Tesla and Facebook on Wednesday.
"The way that management will communicate their outlook will be
key for markets," said Sophie Chardon, a cross-asset strategist at
Lombard Odier. "Investors will have to weigh the possibility of
vaccinations with the reality of new lockdowns" and the impact on
each company.
Apple shares climbed 3.5% in morning trading. Data analytics
firm Palantir Technologies jumped 7.7% and online marketplace Etsy
added 2.3%.
The pandemic and months of stay-at-home orders have split the
economy into companies that benefit and those that suffer. The
biggest tech companies are largely seen as benefactors, as firms
and households increase their use of digital technology as they
operate remotely.
The spread of new coronavirus variants has prompted retightened
lockdown measures around the world and more uncertainty around the
timeline of a return to normal, which may translate to another
boost in demand for tech.
Energy stocks and financials were among Monday's
underperformers. Chevron shares fells 2.2%, while Goldman Sachs
dropped 2.4%, weighing on the Dow.
In corporate news, Kleenex and Huggies maker Kimberly Clark rose
2.8% after it said it expects net sales to rise in 2021, raised its
quarterly dividend and unveiled a $5 billion share buyback
program.
Real-estate firm Tishman Speyer's special-purpose acquisition
company TS Innovation Acquisitions soared 66% after it said it
would merge with Latch, a smart lock maker, to take the company
public.
GameStop's stock surged 42%. The videogame retailer has been at
the center of a fight between bullish day traders communicating on
the internet forum Reddit, and short sellers, who bet heavily
against the stock. Hedge fund Melvin Capital is among those that
lost money from the trade.
Overseas, the pan-continental Stoxx Europe 600 fell 0.7%, which
analysts attributed to reports that the U.K. and France were
heading toward tighter lockdown measures.
In Asia, most major stock benchmarks rose. The Shanghai
Composite Index added 0.5% and Hong Kong's Hang Seng Index climbed
2.4%, buoyed by the rally in tech shares.
South Korea's Kospi Index advanced 2.2%. The index's heavyweight
Samsung Electronics rose 3% and chip maker SK Hynix rallied over
5%. Both are slated to report earnings this week.
China's most valuable internet company, Tencent Holdings, jumped
nearly 11% to a record high in Hong Kong trading. Tencent portfolio
company Kuaishou Technology, a TikTok-like video-recording app,
announced a coming initial public offering that may value it at
about $60 billion. Amsterdam-listed shares of tech investment group
Prosus, one of Tencent's biggest shareholders, rose 5%.
In bond markets, the yield on the benchmark 10-year U.S.
Treasury bond edged down to 1.065%, from 1.090% Friday.
Negotiations over President Joe Biden's plan for additional
fiscal stimulus will be an area of focus for investors. His
proposal for a $1.9 trillion spending package is likely to be a hot
topic of discussion among U.S. lawmakers this week.
Sebastian Mackay, a multiasset fund manager at Invesco, said a
package could be passed in the next couple of weeks. For markets,
"it's about the extent to which the [Federal Reserve] is still in
play, while the fiscal stimulus is coming through," he said.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com
(END) Dow Jones Newswires
January 25, 2021 10:24 ET (15:24 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.