Thursday, the S&P 500 Index climbed 17.22 points, or 0.4%, to 4097.17, its 19th record close of 2021. This time, a resurgence in big technology stocks propped yesterday’s rally. Since April, stocks keep crushing the market, with the broad stock market index rising 3.1%.
S&P 500 Index Surges To New Record
Some of the country’s largest tech companies surged ahead as concerns over rising bond rates calmed down. This tempered concerns about the high valuations of growth stocks. Ed Keon, chief investment officer at QMA, tech is making a strong comeback. “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. Now rates have eased off their highs, you’re seeing those sectors underperform and technology come back into the lead,” he said.
Meanwhile, the tech-laden Nasdaq Composite rose 1% or 140.47 points to 13829.31. Then, the Dow Jones Industrial Average added 57.31 points, or 0.1%, to 33503.57.
Relaxed Monetary Policies
Federal Reserve officials reiterated this week they will continue with easy monetary policies until the economy recovers more. Also, Fed Chairman Jerome Powell expressed concern Thursday over long-term “labor market scarring” due to the pandemic. In addition, he assured Americans of the Fed’s continued support for those out of work. Assistance will continue during the pandemic and subsequent recession. ”It’s important to remember we’re not going back to the same economy. This will be a different economy,” he said.
Meanwhile, the jobless situation remains unsteady. Latest data on jobless claims showed that layoffs rose for a second week, highlighting the recovery’s unevenness. Worker filings for initial unemployment benefits rose to 744,000 last week, up from last week’s revised total of 728,000. The number is far higher than the expected 694.000 claims based on an economists’ survey conducted by the Wall Street Journal.
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The Economy Remains Supportive For Stocks
Adrien Pichoud, a portfolio manager and chief economist at SYZ Private Banking, says the climate remains investor-friendly. “The dynamic remains supportive for stocks. The Fed and central banks, in general, are perceived to be in no rush to raise rates.”
Jason Pride, a chief investment officer of private wealth at Glenmede, described the stocks rally as “a bit of a giveback” after March’s dip. “We went from everybody throwing value stocks out the window to everyone piling into them. And OK, so things change a lot, but did the market deserve to react that quickly that fast?” he added.
Bond Yields Cool Off
At the same time, the yield on the 10-year U.S. Treasury notes closed at 1.632%, which is down from 1.653% as of Wednesday. Earlier, the bond market went as high as 1.749% at the end of last month. Yields rise when bond prices fall.
The cooling off in bond yields led to a tech stock revival after the tech market’s disastrous March. Some of the biggest tech companies like Apple, Microsoft, Amazon, and Google (Alphabet) went up by more than 6% this month.
Big Tech, Big Gains
The S&P 500 index recorded other gainers too, as other software companies went up as well Thursday. For example, ServiceNow added $13.31, or 2.6%, to $524.04 while Autodesk jumped 2.6%, to $293.43. Other big gainers included Etsy and Paypal. The former rose 5.6% or $11.37 to $215.39, while PayPal gained 3.5% or $8.90 to $264.50.
Seema Shah, the chief strategist at Principal Global Investors, sees the current situation as perfect conditions to check the resilience of tech stocks. “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,” Shah said.
Most Markets Followed the US’s Lead
The world’s economy seemed to follow the US mood. Across the pond, the continental Stoxx Europe 600 ticked up 0.6% to a record close. In Asia, most major benchmarks posted gains at the close. This includes the Shanghai Composite Index, which added less than 0.1%, and Hong Kong’s Hang Seng Index, which rose 1.2%.
Watch the Jazz Wealth Manager’s The Closing Beat episode discussing that the stock market closed at record highs once again:
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