S&P 500 Hits New Highs as Investors Return to Big Tech Stocks

UTC by Mercy Tukiya Mutanya · 3 min read
S&P 500 Hits New Highs as Investors Return to Big Tech Stocks
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Investors have reverted to tech stocks. Tech giants Apple and Amazon have seen a rise of over 15% in the past month,

The S&P 500 reached a new record on Wednesday. The stock market index gained 0.34% to achieve an all-time high of 4,358.13. This has largely been attributed to investors’ returning to their usual tech stocks.

Meanwhile, the Dow Jones Industrial Average climbed 104.42 points (0.30%) to 34,681.79 and the Nasdaq Composite relatively nominal (by comparison) 1.42 to reach 14,665.06.

Investors have reverted to their trusted big tech stocks. Tech giants Apple Inc (NASDAQ: AAPL) and Amazon.com Inc (NASDAQ: AMZN) have seen a rise of over 15% in the past month, almost 5 times the S&P 500’s 3.1%. Also, contrary to predictions, the 10-year Treasury yield dropped 1.296% on July 7, the lowest since February.

Jim Paulsen, chief investment strategist at the Leuthold Group explained to CNBC:

“As has been the case for some time, the direction of bond yields and tech stock have been joined at the hip. Traders will be watching as the S&P 500 tech index moves closer to its relative price high established last September. A break above that level would certainly reinforce a sustained leadership cycle for tech.”

Elsewhere, in energy stocks, dips were seen all around in apparent reaction to drops in oil prices. WTI crude, for example, took a spill on Wednesday following a brief six-year high on Tuesday. Occidental Petroleum experienced a 3.4% drop while APA Corp. and Pioneer Natural Resources both fell about 2.3%.

Dan Dicker, Founder of the Energy Word, said:

“This has been a long-time coming. [There’s been] a lot of destruction in the energy patch here in the United States for the past three, four years. The pandemic kind of finished the job for most U.S. producers. OPEC really was in the driver’s seat for most of this year. With this country coming out of the pandemic so strongly and the rest of Europe and the rest of the world still to come out of the pandemic leads many traders to believe — and me to believe — we’re not done with the rally in crude oil.”

Bank stocks, even those of major banks Goldman Sachs Group Inc (NYSE: GS) and Bank of America Corp (NYSE: BAC) dripped further on Wednesday. The industry’s profitability has taken a major hit as long-term bond yields fell even further.

Michael Antonelli, Baird PWM market strategist asserts that the few weeks will be a time of “continued expectations for better earnings and a possible correction”. Market complacency, profit-margin pressures, inflation concerns, Fed tapering and the looming possibility of higher taxes are all ingredients in a recipe for a drawdown.

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