Tech stocks lead rally, but week still shows loss
Stocks closed out a choppy week of trading with a broad rally, though the gains were not enough to keep the Standard & Poor’s 500 index from its first weekly loss in the last five.
The benchmark index rose 1.1% Friday, clawing back all of its losses from a day earlier. It posted a 0.1% loss for the week. The gains were shared broadly by nearly every sector in the index. Technology companies accounted for a big slice of the rally, along with banks, communication stocks and companies that rely on consumer spending. The utilities and consumer staples sectors closed slightly lower. Treasury yields inched higher.
Traders focused on company earnings from big names like Intel, American Express and Honeywell. Shares in Kimberly-Clark, the maker of Huggies diapers and other consumer products, fell by the most since October after the company reported disappointing results.
Corporate earnings have been mostly positive, but investors are weighing economic growth against threats from the pandemic and worries about changes in tax policy.
The S&P 500 gained 45.19 points to 4,180.17. The Dow Jones industrial average rose 227.59 points, or 0.7%, to 34,043.49. The tech-heavy Nasdaq climbed 198.40 points, or 1.4%, to 14,016.81.
Smaller company stocks outgained the broader market. The Russell 2000 index rose 39.24 points, or 1.8%, to 2,271.86.
Banks made solid gains as bond yields ticked higher, which allows them to charge more lucrative interest on loans. The yield on the 10year Treasury rose to 1.56% from 1.55% late Thursday.
Wall Street has been in rally mode in recent weeks as the rollout of COVID-19 vaccinations, the massive support from the U.S. government and Federal Reserve, and a string of encouraging economic data fuel expectations for a stronger economy and solid corporate profit growth this year.
About one-fourth of S&P 500 companies have reported quarterly results so far this earnings season. Of these, 84% have delivered earnings that topped Wall Street’s estimates, according to FactSet. Earnings are also blowing away analysts’ forecasts by a wider margin than average, coming in 23.6% above above the estimates, versus the five-year average of 8.9%, according to FactSet.
Traders bid up shares in several companies Friday that reported quarterly results that beat Wall Street’s estimates. Barbie-maker Mattel added 0.8%, Snap gained 7.4% and Boston Beer rose 3%.
Some quarterly report cards failed to impress investors. Intel fell 5.3% after the company said late Thursday that it expects the ongoing chip supply shortage to remain for some time. The shortage of semiconductors has affected other industries too. Car manufacturers like Ford and General Motors have had to halt production due to the lack of chips.
American Express slid 1.9% after the company reported a 10% drop in revenue from last year as many of its customers stopped using their cards for travel, entertainment and dining. The company has called 2021 a “transition year” and did not give an outlook for the upcoming year due to the uncertainty on when travel and dining would return in the U.S. and globally.
Investors are weighing the implications of President Biden’s plans to introduce higher capital gains taxes to help pay for the increased government spending to help the economy recover from the pandemic.