Tech Shares Rebound After Recent Selloff
May 18 2021 - 01:15PM
Dow Jones News
By Will Horner and Amber Burton
Technology shares inched higher Tuesday and were poised for a
modest rebound after coming under pressure in recent sessions on
worries about accelerating inflation.
The Nasdaq Composite gained 0.6%, on course to pare some recent
losses. The S&P 500 slipped less than 0.1%, while the Dow Jones
Industrial Average declined 0.2%.
Stocks have been choppy in recent trading sessions as concerns
about a rise in inflation weighed on sentiment. Investors are
contending with a raft of unknowns, such as whether rising prices
will prove temporary or more persistent, and whether the Federal
Reserve will act by raising interest rates sooner than planned.
"That always was the key risk: central banks taking away the
liquidity punch bowl before the party has ended," said Brian
O'Reilly, head of market strategy for Mediolanum International
Funds.
Inflation ranging between 2% and 4% could be the "sweet spot"
for stocks, said Mr. O'Reilly. The economic rebound that is fueling
inflation is likely to continue benefiting stocks, such as banks,
as well as travel and leisure companies, that are sensitive to the
reopening. But companies with strong balance sheets and an ability
to raise prices, such as pharmaceutical companies and makers of
common household goods, should also do well, he said.
"Inflation isn't necessarily bad for equities, but there will be
winners and losers in terms of [which ones] are better at passing
on that inflation to the customer," Mr. O'Reilly said.
While tech stocks have taken the biggest hit from rising
inflation concerns, some investors see the recent retreat as an
opportunity to buy fast-growing companies.
"Within tech, there are still some companies that look very
cheap," said Jane Shoemake, client portfolio manager at Janus
Henderson Investors. "If you believe in the longer-term trends
supporting these companies, you should be buying."
Among individual stocks, AT&T dropped 5%, extending its
losses following its deal with Discovery to merge their media
assets into a new, publicly traded business.
Macy's gained 0.9% after reporting first-quarter earnings that
beat expectations. Walmart advanced 2.4% after the retailer lifted
its guidance for the year. Home Depot fell 0.5% even after
surpassing earnings expectations.
The more subdued reaction in stocks following earnings has been
a trend this earnings season, said Ross Mayfield, an investment
strategy analyst at Baird.
"This was a really strong earnings season, but the stock
reaction has been pretty mixed in the day or two after big beats,"
he said. "I think for investors more broadly, there's just a ton of
good news [already] priced into the stock and so you're seeing kind
of a muted reaction."
The yield on the 10-year Treasury note rose to 1.659% from
1.639% Monday. Bond yields rise as prices fall.
Brent crude slipped 2.3% to $67.84 a barrel. The global oil
benchmark earlier climbed above $70 a barrel for the second time
since the onset of the pandemic amid hopes for fuel demand.
Overseas, the Stoxx Europe 600 edged up 0.2%. The U.K.'s FTSE
100 gained less than 0.1% after data showed the U.K.'s unemployment
rate edged lower in April.
Most major Asian indexes closed higher. Japan's Nikkei 225
gained 2.1%, while in Hong Kong, the Hang Seng Index rose 1.4%.
Taiwan's Taiex jumped 5.2%. In mainland China, the Shanghai
Composite Index edged up 0.3%.
Write to Will Horner at William.Horner@wsj.com and Amber Burton
at Amber.Burton@wsj.com
(END) Dow Jones Newswires
May 18, 2021 13:00 ET (17:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Feb 2024 to Mar 2024
FTSE 100
Index Chart
From Mar 2023 to Mar 2024