Wall Street rallies after strong data; tech in focus

US STOCKS rallied on Friday, driving the S&P 500 to a near-record closing high after factory data and new home sales underscored a booming economy while mega cap stocks rose in anticipation of strong earnings reports this week.

The bounceback followed a sell-off on Thursday when reports that US President Joe Biden plans to almost double the capital gains tax spooked investors. Analysts dismissed the slide as a knee-jerk reaction and pointed to the strong outlook.

As the three major Wall Street indexes surged, the CBOE market volatility or “fear” index plunged by almost 10% in a sign of tumbling investor anxiety about the risks ahead.

Companies are providing guidance after staying quiet during the pandemic, while lower bond yields and results that beat estimates are driving the rally, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

“There is a lot of anticipation of what’s to come,” he said. “We’ve seen actual reports beating these very high expectations. Yields have come back down, which is very positive for tech.”

Earnings take center stage this week when 40% of the S&P 500’s market cap report on Tuesday through Thursday, including the tech and related heavyweights Microsoft Corp., Google parent Alphabet, Inc., Apple, Inc. and Facebook, Inc.

Those names, including Amazon. com, Inc., supplied the biggest upside to a broad-based rally in which advancing shares easily outpaced decliners.

Expectations for company results have steadily gained in recent weeks as opposed to a typical decline as earnings season approaches. First-quarter earnings are expected to jump by 33.9% from a year ago, the highest quarterly rate since the fourth quarter of 2010, according to IBES Refinitiv data.

US factory activity powered ahead in early April. IHS Markit’s flash US manufacturing PMI increased to 60.6 in the first half of this month, the highest reading since the series started in May 2007.

In another sign of strong consumer demand, sales of new US single-family homes rebounded more than expected in March, likely boosted by an acute shortage of previously owned houses on the market. —