Tech Stocks Rebound After Selloff
May 05 2021 - 12:24PM
Dow Jones News
By Caitlin Ostroff and Karen Langley
Major U.S. stock indexes rose Wednesday as concern about the
potential for a rise in interest rates eased.
The S&P 500 rose 0.5%, while the Dow Jones Industrial
Average added 0.4%, or about 150 points. The tech-heavy Nasdaq
Composite advanced 0.5% after a sharp decline Tuesday.
Stocks resumed their upward trajectory after Treasury Secretary
Janet Yellen walked back comments that interest rates might need to
rise to keep the economy from overheating.
She clarified after markets closed Tuesday that she was neither
predicting nor recommending that the Federal Reserve raise rates.
Inflation isn't likely to be a problem, and the Fed can handle it
if it does become an issue, she said at The Wall Street Journal's
CEO Council Summit.
"Today is a bit of a relief rally," said Edward Park, chief
investment officer at Brooks Macdonald. "Markets are grinding
higher and they are grinding higher on a relative basis because
equities remain the most attractive."
Money managers said inflation and the Fed's potential response
may become a bigger concern in the second half of the year. Stocks
are likely to continue to rally as long as people agree with the
Fed's view that the recent climb in inflation will prove to be
fleeting, they said.
"Either the Fed is correct or they are very, very wrong," said
Salman Ahmed, global head of macro at Fidelity International. "It
is entirely possible that the market oscillates between these two
scenarios" for the next few months, he added.
U.S. stock indexes have notched numerous records in 2021 as the
economy heals from the pandemic-induced slowdown and corporate
profits beat expectations.
Recent data from the Commerce Department showed that robust
growth in the first quarter returned the U.S. economy to just below
its pre-pandemic size.
That acceleration can be seen in corporate profits. With about
three-quarters of S&P 500 companies having reported, earnings
are projected to have grown 48% in the first quarter from a year
earlier, according to FactSet. That's a big improvement from the
16% growth analysts predicted at the end of December.
"It's hard for this market to stay down for any lengthy period
of time given the enormity of positive economic data confirmed with
tremendous earnings," said Hank Smith, head of investment strategy
at Haverford Trust.
Earnings reports drove moves among individual stocks. Shares of
Activision Blizzard gained 3.2% after the videogame publisher
reported a higher first-quarter profit. T-Mobile US shares added
4.4% after the telecommunications company topped first-quarter
revenue and earnings expectations.
General Motors shares rose 4.2% after the company said early
Wednesday that it expects to hit the high end of its estimated 2021
profit range, with strong pricing and brisk new-vehicle demand
helping offset the financial impact of a chip shortage.
Shares of Peloton Interactive slid 13% after the company agreed
to recall its treadmills and its CEO apologized for an initial
refusal to comply with federal regulators.
In bond markets, the yield on the benchmark 10-year U.S.
Treasury note edged up to 1.598%, from 1.591% Tuesday. Bond yields
rise when prices fall.
Overseas, the pan-continental Stoxx Europe 600 rallied 1.8%,
recovering Tuesday's losses. In Hong Kong, the Hang Seng Index fell
0.5%. Markets in Japan, South Korea and mainland China were closed
for public holidays.
Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Karen
Langley at karen.langley@wsj.com
(END) Dow Jones Newswires
May 05, 2021 12:09 ET (16:09 GMT)
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