Wall Street supported by rise in cyclical stocks

(Reuters) – U.S. stocks gained on Friday, helped by a rise in economy-sensitive cyclical sectors, with the S&P 500 and the Nasdaq on track to end the week on a dull note as investors rotated out of technology-related companies.

FILE PHOTO: American flags hang from the facade of the New York Stock Exchange (NYSE) building after the start of Thursday’s trading session in Manhattan in New York City, New York, U.S., January 28, 2021. REUTERS/Mike Segar

Seven of the 11 major S&P sectors rose, with financials, energy, industrials and materials jumping more than 1%.

The S&P 1500 airlines index also soared 3.8%.

Stay-at-home winners Microsoft Corp, Facebook Inc and Netflix Inc fell between 0.4% and 2.3%, sticking to a trend seen for most parts of the week.

“Market sentiment is relatively positive and optimistic about the outlook for 2021,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.

“You see the cyclical trade in terms of the types of companies that will do better as the economy continues to improve, and as vaccines continue to be distributed across the country.”

Strong earnings, progress in vaccination roll-outs and hopes of a $1.9 trillion federal stimulus package helped U.S. stock indexes hit record highs at the start of the week.

However, the benchmark S&P 500 and the tech-heavy Nasdaq were tracking their first weekly declines this month, as concerns over higher stock market valuations and rising inflation going forward have led to fears of a short-term pullback in equities.

BofA expects a more than 10% pullback in stocks, which are trading at more than 22 times 12-month forward earnings, the most expensive since the dotcom bubble of the late 1990s.

“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Meanwhile, data showed IHS Markit’s flash U.S. composite PMI, which tracks the manufacturing and services sectors, inched up to 58.8 in February.

Applied Materials Inc rose 7.5%, and was among the top boosts to the Nasdaq, after it forecast second-quarter revenue above market expectations, as demand for its semiconductor manufacturing tools picked up during a global shortage of semiconductors.

At 12:10 p.m. ET, the S&P 500 was up 9.43 points, or 0.24%, at 3,923.40, and the Nasdaq Composite was up 87.24 points, or 0.63%, at 13,952.60.

The Dow Jones Industrial Average was up 122.28 points, or 0.39%, at 31,615.62, led by Caterpillar Inc, which rose 4.3% to the top of the index, after the world’s largest farm equipment producer Deere & Co raised its outlook on improved demand.

Deere jumped 10.2%.

Advancing issues outnumbered decliners for a 2.79-to-1 ratio on the NYSE and a 3.51-to-1 ratio on the Nasdaq.

The S&P index recorded 38 new 52-week highs and no new low, while the Nasdaq recorded 171 new highs and four new lows.

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