After a shaky start to the day and a selloff in the overnight futures session Wednesday, stocks and index futures edged higher on Thursday as big tech names overcame disappointing unemployment data.
The Dow Jones Industrial Average added 46.85 points, or 0.1%, to 27,739.73, breaking its three-day losing streak, while the S&P 500, which tumbled late Wednesday following the FOMC Minutes, managed to gain 0.3%, or 10.66 points, to close at 3,385.51. The Nasdaq Composite meanwhile, popped 1% to reach a new record, aided by big tech names like Microsoft, Apple, Google, and Facebook, which all climbed more than 2% each.
With funds like the Technology Select Sector SPDR Fund (XLK), the iShares Expanded Tech Sector ETF (IGM), and the Vanguard Information Technology ETF (VGT) all having solid performance Thursday, technology has led the way for the market this year, urging the S&P 500 back from its late-March doldrums. Notable performers include Facebook, which has gained over 30% year to date, while Apple has advanced over 60% during that time period, and retail giant Amazon has rocketed more than 78% in 2020.
“This tech outperformance is to be expected given the uniqueness of this environment, but that uniqueness is beginning to fade,” said Jeff Kleintop, chief global investment strategist at Charles Schwab. “It seems we’ve left the recession behind us and, hopefully, we’re now past the peak of new coronavirus cases in most of the developed world, including the U.S.”
But Kleintop also expressed the potential decline of tech as other sectors may become frontrunners.
“That may mean a return to more cyclical leadership in this road to recovery,” Kleintop added. He also noted the small-cap Russell 2000 index has outperformed the S&P 500 this month.
There is still some concern about the nature of the economic recovery overall, however, as stimulus negotiations are still uncertain and initial jobless claims increased per Thursday’s release, although there was a recent drop in continuing claims.
“We can’t even be sure this recovery is sustainable as the economy got a huge boost from consumers’ wallets lined with $500 billion of stimulus from Washington from those $1,200 and $600 checks,” said Chris Rupkey, Chief Financial Economist at MUFG. “That money is gone and with it the prospects for a lasting economic recovery where everyone on Main Street benefits. At the moment only stock market investors are riding high as the Federal Reserve’s money-printing benefits Wall Street more than Main Street.”
For more market trends, visit ETF Trends.