Tech stocks fuel rally; investors wary on virus rise

Technology companies helped drive stocks higher Monday on Wall Street after a choppy start as investors weighed the risks that rising coronavirus cases could pose to hopes for an economic recovery.

The S&P 500 rose 20.12 points, or 0.65%, to end the day at 3,117.86. The index slid 0.6% earlier in the day after weakness in overseas markets as the global tally of infections approaches 9 million.

The Dow Jones Industrial Average rose 153.50 points, or 0.59%, to 26,024.96 after earlier sliding 203 points. The Nasdaq composite rose 110.35 points, or 1.1% to 10,056.47. Technology companies accounted for most of the gains, outweighing losses in health care, financial and other sectors. Airlines and cruise line operators were among the biggest decliners.

Shares of American Airlines fell 5.6% on news that the company plans to raise $3.5 billion including $1.5 billion from selling stock and debt that can be converted to stock. Airlines have been scrambling to raise cash to survive a sharp drop in travel. Alaska Airlines said Monday that June revenue will be down about 80% from a year ago, though that’s better than April’s 87% decline and May’s 83% drop. Alaska Airlines’ shares recovered from an early slide and were up 0.7%.

Cruise line operators were among the biggest decliners in the S&P 500. Norwegian Cruise Line, Royal Caribbean and Carnival were down between 4% and 7%. The stocks have been among the most hard-hit as the cruise industry remains shut down because of the coronavirus.

The S&P 500 is coming off its fourth weekly gain in the past five weeks. Encouraging economic data, including retail sales and hiring, have helped stoke optimism among investors that the reopening of businesses in the U.S. and other countries will pull the economy out of its recession relatively quickly. But a rise in new coronavirus cases is clouding the prospects for an economic recovery. On Friday, stocks sold off after Apple said it would be temporarily closing 11 stores again in four states, citing a surge in new virus cases.

“The path of the virus remains uncertain, but the market has certainly gone up and recovered to some degree as though it’s going to go OK,” said Tom Martin, senior portfolio manager with Globalt Investments.

Many professional investors have been warning that the S&P 500’s big rally of nearly 40% since late March has been overdone and that volatility is likely the market’s only certainty in upcoming months. The market began its turnaround after a nearly 34% sell-off in February and March after the Federal Reserve promised large amounts of aid for the economy.

While recent economic data have shown improvement, reflecting the reopening of businesses, it may take years for the economy to fully recover. In contrast, it took just a few months for the stock market to rally back to within 9% of its record.

David Kelly, chief global strategist at JPMorgan Funds, sees a disconnect between the market’s recent gains and what the economic data shows.

He says the markets seem to be straying further and further from fundamentals, which is making him “more distrustful of markets as an economic barometer.”

Investors will get a broader look at the state of the economy toward the end of this week, when the government issues data on consumer spending, weekly unemployment aid applications and durable-goods orders.The Commerce Department today will report new home sales figures for May.