The US stock market battled for direction on Monday, but a strong start for tech stocks pushed the Nasdaq Composite to another record high.
The S&P 500 has changed little while the Nasdaq is up 0.6%. The Dow Jones Industrial Average lost more than 150 points as energy and transportation stocks came under pressure.
Tech stocks led early trading, with Apple, Amazon and Salesforce stocks rising more than 1%. Aerospace giant Boeing weighed on the Dow, with shares falling 3% after regulators told the company it likely won’t get certification for its long-haul aircraft until 2023.
The moves on Monday came when US Treasury bond yields fell over most maturities, with the benchmark US 10-year Treasury bond yield falling to around 1.49%. The returns move inversely to the prices.
Jeff Mills, chief investment officer at Bryn Mawr Trust, said recent strength in technology could be part of a continued regression in cyclical stocks’ outperformance earlier this year.
“I think if you look at financial stocks, which are a really good example, I think it became a crowded trade. I think we sort of had a room that was being cleaned up out there, ”said Mills. “On the flip side, you look at the Amazons of the world, and a lot of those charts have gone sideways for most of six months.”
Stocks ended their best week in months on Friday as investors become more confident that current inflation in the US is not a persistent economic threat but a temporary upward trend.
The S&P 500 finished Friday with a closing record high of 4,280.70 while the Dow rose 237 points. While the Nasdaq Composite closed slightly lower on Friday, it rose 2.35% for the week, its best since April 9, and rose 4.45% for the month of June.
The weekly gains even came after the Commerce Department reported that the inflation indicator rose 3.4% in May, the fastest increase since the early 1990s.
Spikes in the core consumer spending index can cause heartburn among investors as the Federal Reserve likes to watch it for signs of inflation. Still, the increase actually fell short of what economists polled by Dow Jones had forecast, and reaffirmed for investors that macroeconomic price increases are likely to be temporary and manageable.
A massive, bipartisan infrastructure deal appeared to be resurrected on Sunday evening after President Joe Biden made it clear on Saturday that he would not veto the bill if it comes without a separate Democrat-favored reconciliation bill. Republican senators then said on Sunday that the deal can move forward.
The president, flanked by a bipartisan group of senators, said Thursday that after weeks of negotiations, the group had reached a billion-dollar deal to improve the country’s roads, bridges, waterways and broadband. Democrats are pushing for a second bill that would include funding for issues such as climate change, childcare, health care and education.
“The bipartisan infrastructure deal negotiated in Washington DC last week seems to have a chance of becoming a reality,” wrote John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, in a press release. “This program could serve the country in the short and long term in job creation, economic growth, corporate sales and profit growth, and US ability to compete with other nations in the relatively new but hypercompetitive twenty-first century compete.”
The next key economic data is the June job report that the Department of Labor is slated to release on Friday.
Economists expect the number of non-farm workers to have increased by 683,000 in June. While such a robust figure would top 559,000 in May, it would still be below the 1 million some had hoped a US economy could see a rebound after the Covid-19 crisis.
Investors will also check the June report for signs of wage inflation as employers struggle to find workers to fill positions and pandemic-era unemployment benefits run out in some states.
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