By Anna Hirtenstein and Julia Carpenter 

The S&P 500 was poised Thursday to set another record, propelled by a rally in big technology stocks.

The broad market index climbed 0.3% after closing at its 18th record this year on Wednesday. The tech-laden Nasdaq Composite rose 0.8%. The Dow Jones Industrial Average added roughly 0.04%.

Stocks have started the second quarter on strong footing, with the S&P 500 rising 2.7% this month. The largest tech companies have surged ahead as the bond market calmed, easing concerns about the high valuations of growth stocks.

"Within the market, the big factor so far this year has been interest rates," said Ed Keon, chief investment officer at QMA. "So rates going up was part of the reason why you had this broadening of the market and a bit of a rotation towards value stocks, especially financials and energy. And now rates have eased off their highs, you're seeing those sectors underperform and technology come back into the lead."

At the International Monetary Fund's virtual spring meetings, Federal Reserve Chairman Jerome Powell expressed concern over long-term "labor market scarring" and assured continued support for those out of work due to the pandemic and subsequent recession.

"It's important to remember we're not going back to the same economy," he said. "This will be a different economy."

Mr. Powell's remarks underscored Fed policy makers' comments, released Wednesday, that they would continue with easy monetary policies until the economy has recovered more.

The latest data on jobless claims showed that layoffs rose for a second week, highlighting the unevenness of the recovery. Worker filings for initial unemployment benefits rose to 744,000 last week, from a revised total of 728,000 the prior week. Economists surveyed by The Wall Street Journal were expecting a decline to 694,000.

"The dynamic remains supportive for stocks," said Adrien Pichoud, a portfolio manager and chief economist at SYZ Private Banking. "The Fed and central banks in general are perceived to be in no rush to raise rates."

In bond markets, the yield on the 10-year U.S. Treasury note declined to 1.643%, down from 1.653% on Wednesday. It had climbed as high as 1.749% at the end of last month. Yields rise when bond prices fall.

The cooling off in bond yields has led to a revival in the largest technology stocks' rally. Apple, Microsoft, Amazon.com and Google's parent Alphabet -- which are the biggest companies by market value on the S&P 500 -- have each climbed more than 4% this month after stumbling in March.

In Thursday's session, software companies logged big gains, with ServiceNow and Autodesk adding 2.9% and 2.4%, respectively. Other stocks that prospered during lockdown, like Etsy and PayPal Holdings, climbed as well, rising 5.9% and 2.6%, respectively.

"We consider bond yields to be close to the top, so one of the barriers to tech has begun to come down," said Seema Shah, chief strategist at Principal Global Investors. "If there ever was going to be a test for tech, it would be this environment, with rising bond yields and the work-from-home trade starting to fade, but tech has remained really resilient in the face of that."

The consumer staples sector, on the other hand, was a weak spot Thursday with Constellation Brands dropping 5% and Walgreens Boots Alliance off 1.7%.

"A lot of them did very well last year as people stayed home and bought a lot of bleach and other staples," Mr. Keon said. "Now, as the pandemic eases and the broader economy is clearly showing signs of great growth, staples tend to be lower beta both to the economy and to the market, so they have underperformed in that environment."

Overseas, the pan-continental Stoxx Europe 600 ticked up 0.6% on Thursday, a record close. In Asia, most major benchmarks climbed. The Shanghai Composite Index added less than 0.1%, and Hong Kong's Hang Seng Index rose 1.2%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Julia Carpenter at Julia.Carpenter@wsj.com

 

(END) Dow Jones Newswires

April 08, 2021 13:19 ET (17:19 GMT)

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