S&P, Dow Score All-Time Record Highs As Equity Markets Shrug Off Inflation Worries, With Info Tech Stocks Leading Week’s Rally

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Topline

U.S. equity markets rose on Friday and the week, as optimism over an economic recovery on the back of a rapid vaccination rollout, offset investor worries about rising inflation.

Key Facts

On Friday, the S&P 500 rose 0.77%, while The Dow Jones Industrial Average surged almost 300 points, or 0.89%, and Nasdaq Composite moved up 0.51%.

Top price gainers included Carnival Corp. which rose 2.59% following two upgrades by Wall Street analysts on expectations for restarting cruise operations as vaccinations accelerate and the economy improves.

General Electric climbed about 1.12% after UBS pushed its 12-month price target on the stock up to $17.

For the week, the S&P 500 gained about 2.7%, the Dow rose about 2% and the Nasdaq Composite climbed 3.7%.

Also for the week, the strongest performing S&P 500 sectors were information technology (up 5.8%), communication services (up 5.1%) and consumer discretionary (up 4.1%).The week’s worst performing sector was energy, which dropped 1%.

Key Background

However, inflation worries were rekindled on Friday after a report that the producer price index surged by 1% in March (double Wall Street’s expectations), after gaining 0.5% in the prior month. On a 12-month basis, the PPI jumped 4.2% in March, the largest annualized gain in more than 9 years. “Inflation in the pipeline keeps heating up,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. The market also appeared to have downplayed the unexpected rise in jobless claims as the Labor Department reported on Thursday – the number was 744,000 for the week ended April 3, above expectations. It marked the second straight week that claims rose. Also on Thursday, Fed chief Jerome Powell characterized the economic recovery as “uneven and incomplete” and vowed to engineer a stronger rebound from the pandemic.

Contra

However, some market experts were not concerned about inflation and other matters. “Contrary to headlines, rising interest rates, healthy levels of inflation, and an eventual Fed rate hike are not necessarily market negatives,” Larry Adam, chief investment officer at Raymond James, wrote in a note. 

What To Watch For

Colleen MacPherson, portfolio manager at Penobscot Investment Management, told Yahoo Finance that while techs performed well this week, “overall, I think the trend into value, small caps, more cyclical names will continue as the economy reopens and more people are inoculated and we get back to normalcy.”

Further Reading

What Is The Nasdaq Stock Exchange? (Forbes)

U.S. Stock Market Breadth Keeps Improving But Trading Volume Falls (Forbes)

Price Targets Have Been Tested On The Dow, S&P And Transports (Forbes)