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Tech Stocks Lead Significant Rebound On Wall Street

wallstreet oct24 12aug20 lt

Following the sharp pullback seen late in the previous session, stocks showed a strong move back to the upside during trading on Wednesday. The major averages more than offset Tuesday's losses, with the S&P 500 climbing back within striking distance of its record highs.

The major averages pulled back off their best levels going into the close but remained firmly positive. The Dow jumped 289.93 points or 1.1 percent to 27,976.84, the Nasdaq soared 229.42 points or 2.1 percent to 11,012.24 and the S&P 500 surged up 46.66 points or 1.4 percent to 3,380.35.

The strength on Wall Street partly reflected a rebound by tech stocks, which have pulled back sharply in recent sessions after the tech-heavy Nasdaq reached another new record closing high last Thursday.

Big-name tech companies like Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN) posted notable gains, partly offsetting the recent weakness.

Shares of Tesla (TSLA) also moved sharply higher after the electric car maker said its board has approved and declared a five-for-one split of the company's common stock in the form of a stock dividend.

Positive sentiment may also have been generated by news that the U.S. government has secured 100 million doses of Moderna's (MRNA) experimental COVID-19 vaccine in a deal valued at up to $1.525 billion.

Meanwhile, traders largely shrugged off a report from the Labor Department showing the biggest increase in core consumer prices in nearly thirty years.

The Labor Department said its consumer price index climbed by 0.6 percent in July, matching the increase seen in June. Economist had expected consumer prices to rise by 0.3 percent.

Excluding food and energy prices, core consumer prices still advanced by 0.6 percent in July after inching up by 0.2 percent in the previous month. Core prices were expected to edge up by another 0.2 percent.

Core consumer prices showed their biggest increase since January of 1991, partly reflecting another jump in prices for motor vehicle insurance.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said the increase in consumer prices "should end any speculation that the pandemic-related slump in demand will quickly push the economy into a deflationary spiral."

"But this is not a sign that the U.S. is instead about to experience a bout of much high inflation because of supply restrictions," Ashworth said. "It mainly reflects a recovery in the prices of goods and services that were most affected during the early stages of the pandemic."

Traders also seemed to ignore comments from House Speaker Nancy Pelosi, D-Calif., who told MSNBC that Democrats and Republicans remain "miles apart" on a coronavirus relief bill.

Sector News

Semiconductor stocks turned in some of the market's best performances on the day, driving the Philadelphia Semiconductor Index up by 3.4 percent. With the jump, the index reached a new record closing high.

Substantial strength was also visible among software stocks, as reflected by the 2 percent spike by the Dow Jones U.S. Software Index.

Pharmaceutical stocks also showed a significant move to the upside, with the NYSE Arca Pharmaceutical Index surging up by 2 percent.

Retail, utilities and healthcare stocks also saw considerable strength on the day, while airline stocks were among the few groups to buck the uptrend.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.4 percent, while China's Shanghai Composite Index fell by 0.6 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.'s FTSE 100 Index spiked by 2 percent, the French CAC 40 Index and the German DAX Index both advanced by 0.9 percent.

In the bond market, treasuries climbed off their worst levels but still closed modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by 1.2 basis points to 0.670 percent.

Looking Ahead

Trading on Thursday may be driven by reaction to the Labor Department's weekly jobless claims report, which is expected to show a relatively modest drop in jobless claims.

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