Tech rally lifts stocks; Nasdaq sets a record
Technology companies led a broad rally Tuesday on Wall Street that drove the Dow Jones Industrial Average more than 400 points higher and gave the S&P 500 its best day in more than five months.
The gains also pushed the tech-heavy Nasdaq to a record high and added to a solid start to February for the broader market after a downbeat January.
Investors welcomed a decision by China’s central bank to inject $57 billion into its markets. The move is the latest step by Beijing to soften the financial blow of the recent virus outbreak. Worries about the potential global economic effect of a protracted outbreak rattled markets in recent weeks, erasing the S&P 500’s gains last month.
“If China’s going to do what they can to support their markets, then maybe we don’t have as much cause for concern for our markets,” said Willie Delwiche, investment strategist at Baird.
Apple and Microsoft
were among the tech-sector standouts. Like other major technology companies, they rely heavily on doing business with China. Health care, industrial, and financial stocks also notched solid gains.
Utilities, real estate companies and other safe-play assets lagged the market as investors became more comfortable taking on risk. Prices for U.S. government bonds fell sharply, sending yields higher, and the price of gold also fell.
The S&P 500 index rose 48.67 points, or 1.5%, to 3,297.59. It was the index’s biggest single-day gain since early August. The Dow climbed 407.82 points, or 1.4%, to 28,807.63.
The Nasdaq gained 194.57 points, or 2.1%, to 9,467.97, a record high. The Russell 2000 index of smaller company stocks picked up 24.56 points, or 1.5%, to 1,656.77.
China’s latest measure to shore up its markets follows an announcement from Monday that the government would put $173 billion into its markets as they reopened from an extended break.
The world’s second-largest economy is in a lockdown that is threatening economic growth there and globally. More companies, including Sony, are warning investors of a potential hit to revenue and profit because of the virus. More than 20,000 cases have been confirmed globally, along with over 400 deaths. The cases have been mostly in China.
The moves by China signal to investors around the globe that the country’s leadership is doing what it can to provide liquidity to the Chinese economy, Delwiche said.
“That limits some of the worst-case views that were out there from a financial perspective,” he said.
The bond market also was signaling more confidence among investors Tuesday. The yield on the 10-year Treasury note jumped to 1.60% from 1.52% late Monday. Perhaps more importantly, the 10-year yield also jumped above the three-month Treasury yield of 1.56%.
The leapfrog move silenced a recession warning that had been ringing in the bond market, at least for now. Yields for short-term Treasury notes are rarely higher than for longer-term notes, and when it does happen, a rule of thumb says a recession may be on the way in about a year or so. This recession warning signal, which has a fairly accurate but not perfect history, had begun flashing in recent days for the first time since October on worries about the virus.
Rising expectations of further rate cuts by the Federal Reserve also may have helped lift stocks. Investors now foresee an overwhelming likelihood of at least one Fed rate cut this year, with nearly half expecting two cuts, according to data from CME Group.
The Fed has recently indicated that it’s comfortable with rates at their current level. But traders seem to expect that economic anxiety and damage resulting from the China outbreak will lead the Fed to further ease borrowing rates.
Wall Street continued to assess another busy round of corporate earnings Tuesday. Ralph Lauren jumped 9.2% and Clorox gained 5% after reporting solid financial results. Shares in Google’s parent, Alphabet, dropped 2.5% after the company gave investors a disappointing revenue report.
Shares in eBay jumped 8.8% after The Wall Street Journal reported that the owner of the New York Stock Exchange has offered to buy the online marketplace for more than $30 billion, citing unnamed people familiar with the matter. The owner of the NYSE, Intercontinental Exchange, slumped 7.4%.
Cruise ship operators steamed forward as Royal Caribbean climbed 1.3% after taking tougher measures to screen and restrict passengers because of the virus outbreak, including canceling eight cruises in China. The cruise line also gave Wall Street a solid quarterly earnings report and profit forecast for the new fiscal year. Carnival shares rose 1.9% and Norwegian Cruise Line gained 1%.
Benchmark crude oil fell 50 cents to settle at $49.61 a barrel. Brent crude oil, the international standard, dropped 49 cents to close at $53.96 a barrel.
Gold fell $26.80 to $1,550.40 per ounce, silver fell 11 cents to $17.53 an ounce and copper rose 4 cents to $2.55 a pound.