What happened in the stock market today? Tech sees worst day since March, Dow ekes out gain
By Mark DeCambre and Sunny Oh
Nasdaq suffers worst one day fall since March 24
While the Dow managed to end up, other U.S. stock indexes finished lower Tuesday, with the Nasdaq suffering its worst one day fall since March, as investors sifted through comments from U.S. Treasury Secretary Janet Yellen who said interest rates could rise a bit if the economy overheated.
How are stock benchmarks performing?
On Monday (https://www.marketwatch.com/story/dow-up-300-points-nasdaq-under-slight-pressure-after-weaker-than-expected-ism-manufacturing-data-11620056627?mod=market-snapshot), the Dow advanced 238.38 points, or 0.7%, ending at 34,113.23, its third-highest close in history; the S&P 500 added 11.49 points, or 0.3%, to close at 4,192.66, its second-highest finish ever; while the Nasdaq Composite fell 67.56 points, or 0.5%, finishing at 13,895.12, as it posted back-to-back declines.
What's driving the market?
Investors honed in on comments by Yellen (https://www.marketwatch.com/story/yellen-says-interest-rates-may-have-to-rise-somewhat-to-keep-economy-from-overheating-11620143233?mod=mw_latestnews), in an interview with the Atlantic magazine that was recorded Monday and aired Tuesday, in which she said interest rates may have to rise a bit to prevent the economy from overheating, but those remarks were made in the larger context of a speech where she also said inflation would not be an issue.
Still, Yellen has drawn attention to market fears around a tapering of the central bank's asset purchases, a necessary condition before the central bank starts raising rates. Dallas Fed President Robert Kaplan reiterated the need to discuss cutting down its bond-buying in an interview with MarketWatch (https://www.marketwatch.com/story/feds-kaplan-in-interview-presses-for-start-of-discussion-on-tapping-brakes-on-support-for-economy-11620146727).
"It's surprising to me she started saying these comments. You pair that together with Dallas Fed President Kaplan saying it's time to start talking about tapering. You have the sentiment right now building in the market for the Fed to do something," said David Wagner, portfolio manager at Aptus Capital Advisors, in an interview.
Tech-related shares led the move to the downside on Tuesday, with heavyweights Tesla Inc. (TSLA), Google parent Alphabet Inc. (GOOGL)(GOOGL) and Apple Inc. (AAPL) shares finishing lower. Seven out of the 11 major S&P 500 sectors fell, with technology, communication services and consumer discretionary falling by the most.
See:Epic CEO: I decided to sue Apple because of App Store's 'negative impact' (https://www.marketwatch.com/story/epic-ceo-said-he-decided-to-sue-apple-because-of-app-stores-negative-impact-11620068425?mod=mw_quote_news)
Investors were weighing the strength of corporate earnings and the economic resurgence (https://www.marketwatch.com/story/coronavirus-restrictions-easing-in-u-s-and-europe-amid-disaster-in-india-01620097653) from the COVID pandemic against worries about inflation and concerns that prices for equities don't have much further room to run higher given current valuations.
Fiscal stimulus, vaccinations and the Federal Reserve's accommodative stance bolstered a rebound in U.S. economic growth and lifted U.S. stock indexes to record highs this year, but stocks that benefited most from the "work from home" trend during the pandemic have begun to lose momentum even though earnings in the first quarter have been mostly better-than-expected. Profits at S&P 500 index companies are expected to have risen 47.7% in the quarter, compared with forecasts of a 24% growth at the start of April, according to IBES data from Refinitiv.
"The reopening trade is already priced in. I don't think we can go much higher from here," said Jeff Klingelhofer, co-head of investments and a portfolio manager at Thornburg Investment Management.
MarketWatch's Mark Hulbert (https://www.marketwatch.com/story/the-u-s-markets-cape-is-now-the-worlds-highest-and-this-gives-stock-investors-little-cover-11620004719)notes that by one measure stock valuations are higher than 98% of monthly readings since 1881, and more than double the 140-year average, suggesting an extremely overvalued market.
Read:Stock market peak? The 'easy money' has been made, but there's still room for gains (https://www.marketwatch.com/story/stock-market-peak-easy-money-has-been-made-but-room-for-more-gains-strategists-say-11619835288)
On Monday, a closely watched manufacturing report (https://www.marketwatch.com/story/crazy-prices-and-rampant-shortages-frustrate-u-s-manufacturers-ism-shows-11620052168?mod=mw_latestnews)from the Institute for Supply Management for the U.S. disappointed, falling to 60.7% in April from a 38-year high of 64.7% in the prior month. Economists surveyed by Dow Jones and The Wall Street Journal had forecast the ISM index to edge up to 65%.
In economic data Tuesday, the U.S. trade deficit rose 5.6% in March to a record $74.4 billion (https://www.marketwatch.com/story/u-s-trade-deficit-climbs-5-6-to-record-74-4-billion-amid-american-craving-for-imported-goods-11620132839?link=MW_latest_news), reflecting a robust appetite for consumer goods as the economy gains speed. Data also showed U.S. factory orders rose 1.1% in March.
On the public-health front, the U.S. Food and Drug Administration is expected to authorize
-Mark DeCambre; 415-439-6400; AskNewswires@dowjones.com
Which companies are in focus?
How are other assets faring?
(END) Dow Jones Newswires
May 04, 2021 17:03 ET (21:03 GMT)
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