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The concern of Republicans and moderate Democrats in Congress dampened the nascent market rally, as more stimulus is less like a deal. Big Tech shares surged, supporting major stock indexes.
Stocks were mixed on Thursday, but without Big Tech the market would have been very contested. Investors showed risk aversion as further fiscal stimulus was in question.
the
Dow Jones Industrial Average
fell 12.37 points, or 0.04%, to close at 31,176.01. the
S&P 500
increased 1.22 points, or 0.03%, to end at 3,853.07, and
Nasdaq composite
gained 73.67 points, or 0.55%, to close at 13,530.91. The biggest winner of the S&P 500 was
Paccar
(ticker: PCAR), which saw stocks jump 10.5%. The truck maker recently struck a deal to develop autonomous heavy trucks.
The S&P 500 only managed to make a gain because high-tech stocks, which account for over 22% of the index’s market cap, were significantly higher.
Intel
(INTC),
Apple
(AAPL),
Amazon.com
(AMZN), and
Microsoft
(MSFT) increased by 6.5%, 3.7%, 1.3% and 0.3% respectively. In addition, Intel and Apple were the main winners among the Dow components, mitigating the loss of this index.
Meanwhile, the
Invesco S&P 500 Equal Weight ETF
(RSP) fell 0.5%. The fund is not market capitalization weighted, so each stock has the same weight across the fund, making its decline indicative of a market rally focused on just a few stocks.
The slightly “risk-free” stance investors have taken in the stock market came after some central Republicans and Democrats in Congress expressed concern over President Joe Biden’s $ 1.9 trillion fiscal stimulus package. Billions of stimulus dollars are already placed in household bank accounts and await widespread distributions of Covid-19 vaccines to spend.
Still, some on Wall Street note that more stimulus means even more pent-up demand, which increases business revenues and profits. Since the market closed on Jan.5, when it became likely that the spending-willing Democrats would take control of the Senate, the Equal-Weight S&P 500 fund has risen by more than 4% as investors forecast more. stimulus measures.
“The likelihood that a new stimulus package will pass quickly with bipartisan support continues to decline,” Citigroup economists wrote in a note.
Indeed, economically sensitive stocks like petroleum and industrials have retreated. The SPDR (XLE) Energy Select Sector Fund fell 3%. the
SPDR Fund for Select Industrial Sector
(XLI) fell almost 1%.
“I think it is [stimulus in question] play a role [in the weak market]Said Todd Lowenstein, head of equity strategy at The Private Bank at Union Bank. Barron’s. Some are even looking for a correction in equities soon, as all the stimulus measures are built in.
But another aspect of market weakness is that valuations continue to stretch, approaching the cap on the upside. “We’ve been consolidating for the past few weeks and months,” Lowenstein said. “You see a reset in the markets here, and compared to what’s already included in the price.”
Write to Jacob Sonenshine at [email protected]
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