The blue-chip Dow on Friday powered to its fifth consecutive record high and the S&P 500 closed slightly higher as investors bought shares that should benefit from a strong reopening of the US economy, an outlook signaled by rising yields in the bond market.
The tech-heavy NASDAQ tumbled after rebounding more than 6 percent over the past three sessions, as the rising bond yields revived inflation worries and dulled the appeal of high-growth technology shares.
The S&P 500 and NASDAQ posted their biggest weekly percentage gains since early last month after US President Joe Biden on Thursday signed into law one of the largest US fiscal stimulus bills and data reinforced convictions the economy was headed to a high-growth recovery.
Photo: AP
The recent rise in US Treasury yields has raised fears of a sudden tapering of monetary stimulus and put downward pressure on Wall Street in the past few weeks.
The yield on the benchmark 10-year note hit 1.642 percent on Friday, the highest level since February last year.
Boeing Co rose 6.82 percent to lead the Dow and S&P 500 higher. The rising Dow and tumbling NASDAQ reflect an ongoing sell-off in tech as investors buy cyclical and underpriced value stocks that are expected to do well as the economy recovers.
For tech stocks to continue to flourish low rates are needed, and in effect slower growth, said Thomas Hayes, chairman and managing member of hedge fund Great Hill Capital LLC.
However, with the stimulus package the economy is likely to expand 7 to 9 percent this year and pressure interest rates, he said.
“That’s why you’re seeing rates rise today, because the reopening is happening faster and stronger than anticipated, and that’s when value and cyclicals and economically sensitive stocks outperform,” Hayes said.
The quick distribution of COVID-19 vaccines and more fiscal aid have spurred concerns of rising inflation, despite assurances from the US Federal Reserve that it would maintain an accommodative policy.
All eyes will be on the central bank’s policy meeting next week for further cues on inflation.
US consumer sentiment improved early this month to its strongest in a year, a survey by the University of Michigan showed on Friday.
The Dow Jones Industrial Average rose 293.05 points, or 0.9 percent, to close at 32,778.64, and the S&P 500 gained 4 points, or 0.1 percent, to 3,943.34. The NASDAQ Composite dropped 78.81 points, or 0.59 percent, to end at 13,319.86.
For the week, the Dow added 4.07 percent, the S&P rose 2.64 percent and the NASDAQ gained 3.09 percent. For the Dow it was its biggest weekly gain since November last year.
The volume on US exchanges was 11.64 billion shares.
The NASDAQ has been particularly hit by the sell-off in the past few weeks, and confirmed a correction at the start of the week as investors swapped richly valued technology stocks with those of energy, mining and industrial companies that are poised to benefit more from an economic rebound.
Value stocks added about 0.8 percent, while growth stocks slumped 0.62 percent in a continuation of a rotation that began late last year.
The high-flying, but yield-sensitive group of stocks including of Facebook Inc, Apple Inc, Amazon.com Inc, Netflix Inc, Google-parent Alphabet Inc, Tesla Inc and Microsoft Corp, which fueled the past’s year rally, fell.
Tech, communication services and consumer discretionary indexes, which house these mega-cap stocks, slipped the most among major S&P sectors.
Advancing issues outnumbered declining ones on the NYSE by a 1.24-to-1 ratio; on the NASDAQ, a 1.14-to-1 ratio favored advancers.
The S&P 500 posted 83 new 52-week highs and no new lows; the NASDAQ Composite recorded 396 new highs and 12 new lows.
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