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Nasdaq closes up on tech stocks strength, as hawkish Fed limits S&P

Economy Jun 17, 2021 07:12PM ET
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2/2 © Reuters. FILE PHOTO: The New York Stock Exchange is pictured in the Manhattan borough of New York City, New York, U.S., April 16, 2021. REUTERS/Carlo Allegri/File Photo 2/2
 
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By David French

(Reuters) - Conviction in the strength of the economic recovery pushed investors into U.S. technology stocks on Thursday, driving the Nasdaq higher, although a post-Fed hangover left a subdued S&P nursing a very minor loss.

The marginal decline was the S&P's third negative finish in a row, while the Dow - with a more pronounced drop - posted its fourth straight lower close.

Many investors were still processing the Federal Reserve's unexpectedly hawkish message on monetary policy from the previous day, which projected the first post-pandemic interest rate hikes in 2023.

Fed officials cited an improved economic outlook as the U.S. economy recovers quickly from the pandemic, with overall growth expected to hit 7% this year. While careful not to derail the recovery - with no end in sight for supportive policy measures such as bond-buying - the rate-rise signal highlighted concerns about inflation.

"I think there was a scenario that people had in mind, that the Fed was going to allow for a larger and longer inflation overshoot, and I think with the increase in the dot plot yesterday... people are rethinking that scenario," said David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management.

Technology shares, which generally perform better when interest rates are low, powered a rally on Wall Street last year as investors flocked to stocks seen as relatively safe during times of economic turmoil.

Investors returned to such positions on Thursday. Chipmaker Nvidia (NASDAQ:NVDA) Corp jumped 4.8%, posting its fourth consecutive record close, after Jefferies (NYSE:JEF) raised its price target on the stock.

Meanwhile, shares of Apple Inc (NASDAQ:AAPL), Microsoft Corp (NASDAQ:MSFT), Amazon.com Inc (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) shook off premarket declines to advance between 1.3% and 2.2% as investors bet that a steady economic rebound would boost demand for their products in the long run.

The Nasdaq ended 13 points short of its record finish on Monday, but it was still the index's second-highest close ever.

The Dow Jones Industrial Average fell 210.22 points, or 0.62%, to 33,823.45, the S&P 500 lost 1.84 points, or 0.04%, to 4,221.86 and the Nasdaq Composite added 121.67 points, or 0.87%, to 14,161.35.

Graphic: U.S. tech stocks vulnerable to changes in interest rates - https://fingfx.thomsonreuters.com/gfx/mkt/dgkplnykepb/Pasted%20image%201623937801421.png

Interest rate-sensitive bank stocks slumped 4.3% as longer-dated U.S. Treasury yields dropped.

The strengthening dollar, another by-product of the previous day's Fed news, pushed U.S. oil prices down from the multi-year high hit earlier in the week. The energy index, in turn, was off 3.5%, the biggest laggard among the 11 main S&P sectors.

Other economically sensitive stocks, including materials and industrials, fell 2.2% and 1.6% respectively as data showed jobless claims rising last week for the first time in more than a month. Still, layoffs appeared to be easing amid a reopening economy and a shortage of people willing to work.

Volume on U.S. exchanges was 11.77 billion shares, compared with the 10.67 billion average over the last 20 trading days.

The S&P 500 posted 23 new 52-week highs and 2 new lows; the Nasdaq Composite recorded 82 new highs and 37 new lows.

Nasdaq closes up on tech stocks strength, as hawkish Fed limits S&P
 

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Comments (23)
Mike Brarey
Mike Brarey Jun 17, 2021 5:59PM ET
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no, it's just the market figuring out the the Fed will let inflation run hot
Hunter Gassaway
Hunter Gassaway Jun 17, 2021 3:05PM ET
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That $250 Billion the Senate gave to the tech industry last week , which I didn't vote on, should have a longer lasting effect than one week. And Inflation is what we get ( Fed purchases $80 billion of Treasury debt and $40 billion for mortgage back securities...wow, that seems fair! Where have I seen that before?)
Hunter Gassaway
Hunter Gassaway Jun 17, 2021 3:05PM ET
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Fed spending $120 Billion a month. Out of control.
Don Getty
Don Getty Jun 17, 2021 3:05PM ET
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Hunter Gassaway  as apposed to what they were doing a year ago - lol
Joanna Yin
Joanna Yin Jun 17, 2021 2:30PM ET
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Just because of 25% investment tax credit for investments in semiconductor manufacturing?
Ricardo Diogo
Rcd72 Jun 17, 2021 2:22PM ET
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FED keeps driving up the inflation. this useless liquidity will burst into a financial crisis and damage economy
Mitchel Pioneer
Mitchel Pioneer Jun 17, 2021 1:47PM ET
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With clockwork precision, the US Ponzi Scheme "rallies" mid-day, and yet more losses are removed from the system.  Fraudulent, criminally manipulated joke.  Why doesn't the "market" plunge mid-day during "rallies?"  Assume the proper position America.
Vincenzo Tilotta
Vincenzo Tilotta Jun 17, 2021 1:47PM ET
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What do you suggest as being "the proper position"?
Duncan McTaggart
Duncan McTaggart Jun 17, 2021 1:30PM ET
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Hawkish???? LOL
Mart Bab
Rubberduck1973 Jun 17, 2021 1:13PM ET
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Fake fake fake markets 🙈🙈🙈
Carrascal Eduardo
Edouard Jun 17, 2021 12:58PM ET
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"Technology shares, which generally perform better when interest rates are low." The FAANGs and other technolagic generators of mountains of free cash flow are in no way going to submit to the aforementioned rule, which is nonsense. "The group has come under pressure this year on fears that rising inflation would lead the Fed to hike interest rates sooner than expected" only start ups and other heavily indebted technologies. A very different thing is that its clients are reluctant to invest in technologies that do not produce clear and solid productivity gains, which in a range of rates of 0.25-3% will be unlikely or negligible in the economy as a whole. The statements in this writing should be reviewed.
John Dislias
HephaestusTrades Jun 17, 2021 12:22PM ET
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Panic sellers go home . You cant sell ford ,ual and AA without reason
jake goldstein
jake goldstein Jun 17, 2021 12:21PM ET
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Professor Segal is spot on .God Bless his for predicting the FED move and now God Bless him for looking into the future and seeing lots of dark clouds.He wants a more honest economy but the FED are been too slow to move.
 
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