Technology gains push S&P 500 and Nasdaq to record highs
The strength of tech stocks pushed U.S. indices a step further to record highs on Monday, more than offsetting losses across much of the rest of Wall Street.
The S&P 500 rose 9.91 points, or 0.2%, to 4,290.61 after fluctuating between small gains and losses for much of the day. It added to its all-time high on Friday as optimism grows about a strengthening economy and expectations that the Federal Reserve will keep interest rates low for some time to come.
Healthy gains from Nvidia, Facebook and other stocks that have been the winners of the growing online world have helped the Nasdaq composite reach record highs. It rose 140.12, or 1%, to 14,500.51. But the majority of stocks on the S&P 500 and Wall Street weakened, and the Dow Jones Industrial Average fell 150.57, or 0.4%, to 34,283.27.
Trading has been relatively calm around the world, with European stocks declining slightly and several Asian indices virtually unchanged.
The action was most notable in the bond market, where the 10-year Treasury yield fell to 1.47% from 1.53% on Friday night. It hit 1.70% last month, but is retreating as concerns over high inflation have subsided somewhat.
Lower long-term rates may reduce the profits banks make by lending money, and financial stocks have been a major drag on the S&P 500. Wells Fargo slipped 1.3% and Capital One Financial fell 2.5%.
But lower Treasury yields may also make it easier to justify the high prices of high-growth stocks, and gains in tech stocks have been the main reason for the S&P 500’s strength.
Apple rose 1.3%, Microsoft 1.4% and Intel 2.8%. Nvidia jumped 5% after Britain’s Sunday Times reported that several large customers of British semiconductor firm Arm said they were in favor of its plan to take over Nvidia.
Facebook climbed 4.2% after a federal judge dismissed antitrust lawsuits brought against it by the Federal Trade Commission and a group of state attorneys general.
Still, concerns remain on Wall Street, and a measure of stock market nervousness has risen by about 1%.
Some measures of the economy may have already peaked after emerging from the recession caused by the pandemic. Stock prices seem dear to critics after rising much faster than corporate earnings. And inflation remains a concern, even as more and more investors believe the Federal Reserve will be only a temporary problem.
Much of the turmoil in the markets is a result of the speed at which the economy has rebounded from its pandemic slump.
“When you get out of it quickly, it starts to cause concern for investors, but I remind them that we are still at the start of a cycle,” said Brian Levitt, Global Markets Strategist at Invesco. “I would expect this to play out over time.”
The next market turning point could come on Friday, when the US government gives the last monthly update on the number of jobs created by the economy and wages.
Economists expect the report to show employers created 700,000 more jobs than they cut in June. It would be an acceleration after a few months of disappointing hiring.
They also expect the report to show average hourly earnings jumped 3.7% in June from a year earlier.
A sharp rise in wages would be an even greater inflationary concern for the markets than the recent rise in commodity prices. Oil, lumber and other commodities have shown this year that they can skyrocket quickly, but they can also drop almost as quickly.
Higher wages for workers, on the other hand, tend to be more sustainable. If inflation ends up being more than the “transitory” problem that the Fed and many investors seem to believe, it could force the Fed to be more aggressive in raising interest rates quickly and disrupting markets.
Crude oil prices fell on Monday, but the price of a US barrel is still up 50% for the year. This has contributed to gasoline prices which are about 90 cents higher than at the same time last year.