Late tech rally leaves Wall Street stock indexes modestly higher
A late-afternoon turnaround led by technology stocks left major indexes moderately higher on Wall Street on Monday, averting more losses for the market after a brutal April in which widespread tech sell-offs dragged down major benchmarks.
The Standard & Poor’s 500 rose 0.6% after having been down 1.7% earlier in the day. The Dow Jones industrial average rose 0.3% and the tech-heavy Nasdaq gained 1.6%.
Bond prices fell, pushing yields higher. The yield on the 10-year Treasury briefly rose to its highest level since late 2018.
The uneven start to May follows an 8.8% skid for the benchmark S&P 500 in April led by large tech companies, which started to look overpriced, particularly with interest rates set to rise sharply as the Federal Reserve moves to tame surging inflation. The central bank is expected to announce another interest rate hike on Wednesday.
“After the carnage of last week and the first four months of the year, I wonder if maybe we’re getting another ‘sell-the-rumor, buy-the-news’ sort of event with respect to the Fed,” said Willie Delwiche, investment strategist at All Star Charts.
The S&P 500 rose 23.45 points to 4,155.38, while the Dow advanced 84.29 points to 33,061.50. The blue-chip index bounced back from a 527-point deficit. The Nasdaq index rose 201.38 points to 12,536.02.
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Smaller-company stocks also reversed course after spending much of the day in the red. The Russell 2000 index rose 18.18 points, or 1%, to 1,882.91.
Just over half of the stocks in the S&P 500 closed higher, with the technology and communication sectors driving much of the advance. Chipmaker Nvidia and Facebook’s parent company, Meta Platforms, each rose 5.3%.
The broader market often bends to the direction of technology stocks. Many companies in the sector have large market capitalizations and therefore have more force in pushing the major indexes up or down.
Still, it’s unusual for tech stocks to rally at the same time that bond yields are rising. That’s because higher yields make bonds increasingly attractive assets relative to more risky and expensive stocks, particularly those of technology and other growth-oriented companies.
“Yields moving higher so far this year has been bad news for growth stocks,” Delwiche said. “That you can have this bounce this afternoon in growth stocks while yields are holding up is a little bit surprising.”
U.S. crude oil prices were relatively unchanged after slipping earlier in the day. European energy ministers are meeting in Brussels to discuss Russian supply issues and sanctions. Russia’s invasion of Ukraine prompted a jump in already high oil and natural gas prices.
Bond yields rose significantly. The yield on the 10-year Treasury rose to 2.99% after briefly rising to 3.00% from 2.89% late Friday. It hadn’t been above 3% since Dec. 3, 2018, according to Tradeweb.
Treasury yields have been rising all year as investors prepare for higher interest rates. Markets are expecting an extra-large interest rate increase this week from the Federal Reserve as it tries to tame inflation, which is at its highest level in four decades.
The central bank is expected to raise short-term interest rates by double the usual amount when it releases its latest statement on Wednesday. It has already raised its key overnight rate once, the first such increase since 2018, and Wall Street is expecting several big increases over the coming months.
Rate hikes from the Fed will further increase borrowing costs across the board for people buying cars, using credit cards and taking out mortgages. Investors have been concerned about a surge in inflation and its effects on businesses and consumers. But they are also concerned about how the rate hikes will play out in fighting inflation and whether a more aggressive Fed could actually hurt economic growth.
Concerns about inflation have also been hanging over the latest round of corporate earnings reports. Disappointing results or outlooks from Apple, Google’s parent company and Amazon helped fuel the selling last week. Investors are reviewing the latest results and statements to gauge just how heavily rising costs have affected operations and whether price hikes have hampered sales.
Wall Street is in for another busy week of earnings reports. Pfizer reports results Tuesday, CVS Health reports results Wednesday and Kellogg reports results Thursday.
