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Dow Eases From Record Highs as Investors Back Cyclicals, Dump Tech

Stock MarketsMay 10, 2021 03:22PM ET
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© Reuters.

By Yasin Ebrahim

Investing.com – The Dow eased from intraday record highs Monday, as investors added to bets on economically sensitive cyclical stocks, but turned away from tech stocks on fears over the threat for inflation and rising rates.

The Dow Jones Industrial Average rose 0.18%, or 62, but had hit an intraday high of 35,091.56 . The S&P 500 was down 0.8%, and the Nasdaq Composite slumped 2.3%.

Cyclicals made a strong start to the week, with financials, industrials and energy in the ascendency amid ongoing optimism the economic rebound will continue to gather pace despite last week's softer labor market report. 

Energy stocks, however, did lose some of their early steam, after oil prices cut gains despite ongoing supply disruptions following a cyberattack on the country’s largest fuel pipeline, Colonial Pipeline.

"With the capacity to transport 2.5 million barrels of gasoline and other oil products per day, the affected pipelines supply almost half of the fuel needed on the US East Coast," Commerzbank (DE:CBKG) said.

Big tech, meanwhile, was under pressure as investors shied away from high growth stocks on fears the pace of inflation is set to continue that will eventually force the Federal Reserve to tightened policy.

Google-parent Alphabet (NASDAQ:GOOGL), and Facebook (NASDAQ:FB), were downgraded to neutral from buy by Citigroup (NYSE:C) on worries that ad-revenue growth is set to wane. 

"[A]d-growth will likely decelerate after 2Q21 (on tougher comps). Historically, that usually isn’t bullish for multiples. As such, we downgrade GOOGL and FB to neutral," Citigroup said.

But others on Wall Street are not so sure that big tech has had its day in the sun.

"With worries around peak tech earnings, it's as 'good as it gets philosophy,' macro inflation/rate jitters, and work from home tailing off as vaccine deployment looks to be hitting the masses, we are seeing multiples compress across the tech sector," Wedbush said.

"However massive growth (and further multiple expansion) is still on the horizon with tech stocks underestimating this surge of demand for the next 2-3 years," it added.

As the quarterly earnings season draws to a close, investors continued to cheer mostly bullish quarterly earnings from corporates.

BioNTech SE (NASDAQ:BNTX) reported better-than-expected profit and revenue in the first quarter, and said that there was no evidence to suggest that it would need to update its Covid-19 vaccine for emerging variants of the virus.

Tyson Foods (NYSE:TSN), reported first-quarter results on both the top and bottom lines, but flagged headwinds for its chicken business. Its shares were flat, after paring intraday losses.

Marriott International (NASDAQ:MAR) reported mixed first-quarter results as earnings beat, but revenue fell below expectations. The company did, however, tout optimism ahead, pointing to increased demand as the rollout of vaccines continues.

About 86% of S&P 500 companies that reported earnings through May 7 have beaten analysts’ estimates for earnings per share, and 76% have reported a positive revenue surprise, FactSet said. 

Dow Eases From Record Highs as Investors Back Cyclicals, Dump Tech
 

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Comments (8)
king michael
king michael May 10, 2021 4:16PM ET
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Tech is determined to keep crashing as US has been preventing semiconductor companies to sell to the world and to gain capital to grow. Semiconductor is the blood for almost all industries.
Mox Mox
Mox Mox May 10, 2021 3:33PM ET
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This is a nice and orderly deflating of the tech stocks or is it the smart money exiting so the panic start later when the bagholders realise it's too late?
Leon Kelly
Leon Kelly May 10, 2021 3:32PM ET
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Dow down 3% tomorrow
Allatra Yiveh
AllatraYiveh May 10, 2021 3:29PM ET
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Don't worry stonks only goes UP. Thanks to FED, helping the "economy" of the "masses". If you know what I mean.
Mitchel Pioneer
Mitchel Pioneer May 10, 2021 3:27PM ET
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More flagrant intervention in "late trade" to keep the DOW green, as the laughingstock of the financial world continues to defraud America on broad daylight.
Gershom Zvi
Gershom Zvi May 10, 2021 3:05PM ET
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Dems have no idea how to manege the stockmarket
Vance Vinson
Vance Vinson May 10, 2021 3:05PM ET
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I didnt realize it was any political party's job to manage the stock market..
Steffen vdm
Steffen vdm May 10, 2021 3:05PM ET
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Maybe because this market makes no sense?
king michael
king michael May 10, 2021 2:41PM ET
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Keep short. The country is on on the way for bankruptcy since Trump opened that door.
Dave Cash
Dave Cash May 10, 2021 1:51PM ET
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So 'investors' are dumping one asset class that is at all time highs, to buy up another asset class at all time highs.
John DANDREA
JD09 May 10, 2021 1:51PM ET
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Pretty much sums it up nicely.
alex gallegos
alex gallegos May 10, 2021 1:51PM ET
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Isn't there enough money to buy up both asset classes 🤔
Pierce Bourgeois
Pierce Bourgeois May 10, 2021 1:51PM ET
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Lol
CMat CMat
CMat CMat May 10, 2021 1:51PM ET
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Love it
 
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