Technology-related stocks pared gains Monday morning while the Dow and broader market lagged behind at the start of a busy week of earnings that will feature results from tech giants Apple Inc., Tesla Inc. and Facebook Inc.
What are major benchmarks doing?
- The Dow Jones Industrial Average DJIA slid 165 points, or 0.5%, to around 30,832.
- The S&P 500 SPX gained 4 points, or 0.1%, to 3,846.
- The Nasdaq Composite COMP climbed 106 points, or 0.8%, to around 13,649, after establishing an intraday record near the open at 13,728.98.
Stocks ended mostly lower Friday but logged weekly gains, with the Dow rising 1.6% and the S&P 500 advancing 1.9%. The tech-heavy Nasdaq Composite ended Friday at an all-time high leaving it with a weekly rise of 4.2%.
What’s driving the market?
Even as blue-chip industrial stocks struggled at the start of this week, tech shares were rallying as investors prepared for a busy week of earnings reports, with roughly a quarter of the S&P 500 due to release quarterly results, including Apple Inc. AAPL, Tesla Inc. TSLA and Facebook Inc. FB.
Earnings of large-cap tech-related companies are expected to show the continued gains from the stay-at-home environment due to the COVID-19 pandemic, said Richard Saperstein, chief investment officer at Treasury Partners.
The rally has left valuations for large-cap tech shares stretched, fostering fears of a potential bubble.
At the same time, investors remain positive about prospects for additional fiscal stimulus as President Joe Biden pushes for a $1.9 trillion package, though it faces difficult negotiations in a Senate where Democrats have a slim majority.
Stimulus expectations have helped investors look past worries over potentially more contagious variants of the virus that causes COVID-19 as well as snags in vaccine distribution, said Ipek Ozkardeskaya, strategist at Swissquote Bank, in a note.
“With all this, the S&P 500 finds solid support near the 3800 mark as investors can simply not have enough of the historical market rally. No one wants to jump off the back of a running bull,” Ozkardeskaya said. “So, despite the skyrocketing blue-chip prices, any downside correction to the big U.S. stock indices will likely be seen as interesting dip buying opportunities by investors.”
And the Federal Reserve will hold its first policy meeting of the new year on Tuesday and Wednesday. While no policy moves are expected, Fed watchers expect Chairman Jerome Powell and fellow policy makers to signal a cautious but optimistic outlook while also reinforcing expectations the central bank won’t be quick to ease up on monetary stimulus efforts.
See: Stock-market bulls brace for major gut check as earnings, Fed and GDP loom
Which companies are in focus?
- Shares of videogame retailer GameStop Corp. GME surged 104%, after storming 51% higher on Friday to leave it up more than 240% so far this month. The most recent gains came after short selling firm Citron Research and speculative buyers organizing on Reddit clashed.
- AMC Entertainment Holdings Inc. AMC shares jumped 29% after the world’s biggest cinema-chain operator said it had raised $917 million in debt and equity to help it get through a coronavirus-impacted winter.
- Merck & Co. Inc. MRK shares were down 0.1% after the drugmaker said it was discontinuing development of its two COVID-19 vaccine candidates following disappointing trial results, and will instead focus on the development of two investigational therapeutic candidates.
- World Wrestling Entertainment Inc. WWE shares fell 2% after it announced Monday it had agreed to license its content to NBC Universal’s new streaming service Peacock.
- Shares of Kimberly-Clark Corp. KMB rose 6.2% after the consumer products company reported fourth-quarter profit and sales that beat expectations and announced a dividend increase and a new billion stock repurchase program.
- AMC Entertainment Holdings Inc. shares AMC soared 31% after the biggest cinema-chain operator in the world said it has raised $917 million in debt and equity.
Which assets are on the move?
- The yield on the 10-year Treasury note BX:TMUBMUSD10Y slipped 4.5 basis points to around 1.046%. Yields and bond prices move in opposite directions.
- Crude oil futures CL for February were down 0.3% to $52.14 a barrel, while gold futures GCG21 gained 0.4% to 1,864.60 an ounce.
- The Stoxx Europe 600 index XX:SXXP fell 0.2%, while the U.K.’s FTSE 100 UK:UKX tumbled 0.6%. Hong Kong’s Hang Seng Index surged 2.4%, topping the key 30,000 level.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.3% on the day.
