Nasdaq closes higher with technology stocks back in favour

People walk past the New York Stock Exchange, Nov 10, 2020. PHOTO: REUTERS

NEW YORK (REUTERS) - The Nasdaq closed up 2 per cent on Wednesday (Nov 11) as investors switched back to technology stocks and away from economically sensitive sectors as they weighed Covid-19 vaccine progress against a virus surge and likely timing for a economic rebound.

After falling sharply for two days, the tech-heavy Nasdaq was boosted by "stay-at-home" stocks such as Microsoft and Netflix, which closed up more than 2 per cent and and Apple, which advanced more than 3 per cent.

Monday's encouraging late-stage coronavirus vaccine trial data had prompted a two-day rotation away from technology stocks into sectors that outperform coming out of a recession such as industrials, materials and energy.

But investors changed gears Wednesday to buy the S&P growth index, which includes the less economically sensitive technology stocks, and sell the value index, which includes banks and energy stocks.

"We'll probably have these fits and starts of the rotation until we get into the spring," said Shawn Snyder, head of Investment Strategy at Citi Personal Wealth Management. "There's still really strong earnings for these technology companies and you're still facing a potential surge in Covid cases through the winter months and renewed restrictions and lockdowns."

Also, the top US infectious disease specialist urged caution until vaccines are distributed, as California and states across the US Midwest and Northeast tightened restrictions aimed at containing the virus spread.

"To think the style we've been living our lives in for the last nine months is suddenly going to change is a bit optimistic. Its going to take longer," said Citi's Snyder.

The Dow Jones Industrial Average fell 23.29 points, or 0.08 per cent, to 29,397.63, the S&P 500 gained 27.13 points, or 0.77 per cent, to 3,572.66 and the Nasdaq Composite added 232.58 points, or 2.01 per cent, to 11,786.43.

The technology index, up 2.4 per cent, led gainers among the S&P 500's 11 major sectors, followed by the consumer discretionary index, which closed up 1.5 per cent, flanked by The biggest sector decliners were materials, down 1.4 per cent followed by industrials and energy, both finishing down more than 0.8 per cent.

"The story of the week and what's persisting today is the almost see-saw, barbell view in the market between growth, tech and stay-at-home investments versus the more cyclical value investments that are tied to the broader rebound and recovery in the economy," said Craig Fehr, investment strategist at Edward Jones in St. Louis, Missouri.

"The broad view is the greater optimism for the longer term view of the economy, post vaccine, post pandemic. We're seeing a little bit of that shine come off it today."

Markets, which also got a boost after Democrat Joe Biden was declared the projected the winner of the US election, have shrugged off legal challenges from President Donald Trump as no evidence of problems with votes has so far been produced.

The Democratic Party retained control of the US House of Representatives with a lower majority, the Associated Press reported. As a result investors are now focused on whether they can wrestle Senate control from Republicans, which will not be decided until two runoff elections in Georgia in January.

Democrats may not be able to win enough votes for their larger economic stimulus plan if Republicans retain a Senate majority.

As the Covid restrictions were announced, shares of some retailers and restaurants lost ground. Macy's fell 4.4 per cent while Darden Restaurants finished down 5.5 per cent. The S&P 600 consumer discretionary index closed above its session low to end the session down 0.1 per cent.

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Lyft rose 1 per cent after the ride-hailing app said it was working on a new service to take a slice of the burgeoning food-delivery market, as it works to make up for a drop in quarterly revenue.

The Philadelphia SE chip index finished up 3.7 per cent after suffering sharp losses on Tuesday.

Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.31-to-1 ratio favoured advancers.

The S&P 500 posted six new 52-week highs and no new lows; the Nasdaq Composite recorded 83 new highs and 11 new lows.

On US exchanges 9.65 billion shares changed hands, in a sharp volume decline from Monday and Tuesday but not far below the 9.94 billion average for the last 20 sessions.

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