Dow ends slightly higher, small-caps surge 2% as reopening names catch bid

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MARKET SNAPSHOT

© Getty Images/iStockphoto

Major U.S. stock indexes booked modest gains Wednesday, while small-caps charged higher, as Treasury yields retreat and investors focus on shares that might perform better as the economy reopens from COVID.

Wednesday also marks the 125th anniversary of the Dow Jones Industrial Average, which made its debut May 26, 1896.

How did major indexes do?

  • The Dow Jones Industrial Average rose 10.59 points, less than 0.1%, to close at 34,323.05, after slipping between small gains and losses.
  • The S&P 500 added 7.86 points, or 0.2%, ending at 4,195.99.
  • The Nasdaq Composite Index gained 80.82 points, or 0.6%, finishing at 13,738.00.
  • The small-capitalization oriented Russell 2000 index surged 2%, or 43.52 points, ending at 2,249.27.

On Tuesday, stocks gave up early gains to end slightly lower. The Dow fell 81.52 points, or 0.2%, to end a three-day winning streak. The S&P 500 fell 0.2%, while the Nasdaq Composite shaved off 4 points, or less than 0.1%, to end at 13,657.17.

What drove the market?

Stocks edged up Wednesday and the main indexes finished not far off all-time highs, with retailers, travel and leisure companies in focus, as well as growth stocks.

Cathie Wood’s closely watch exchange-traded fund ARK Innovation ETF which favors growth stocks and includes crypto exposure, advanced 1.8%, but was still 10.6% lower on the year to date.

See: Big bitcoin moves can shake stock market, study finds — ‘no longer fringe asset’

“While I don’t necessarily believe the market, as a whole, is viewing these stocks as having gotten to the point of value,” said Robert Pavlik, senior portfolio manager at Dakota Wealth for “high-valuation stocks,” some people see them “as having sold off enough to be attracting some attention.”

“The herd follows the lead sheep,” he told MarketWatch. “This is just a precursor to what the summer is probably going to look like.”

Meanwhile, Investor concern about inflation may be ebbing, with 10-year Treasury yields lower on the week at 1.572%, despite data earlier this month showing that the April consumer-price index rose at a hotter-than-expected 4.2% yearly pace.

Read: Inflation ‘surprises’ are ‘almost off the chart’ as data runs hotter than expected

Stocks may continue to struggle for direction ahead of the release Friday of the Federal Reserve’s favorite measure of inflation, the personal consumption expenditure index, analysts said.

But investors were bidding up shares of small-cap companies on the day, while technology stocks, represented by the tech-heavy Nasdaq Composite on pace for a weekly climb of 2%, as yields for government debt trade near 3-week lows, supporting buying in assets that have performed well in a low-interest-rate environment.

“This is essentially a rebound in the reopening names,” Quincy Krosby, chief market strategist at Prudential told MarketWatch.

“At the same time, there are concerns…but the fed has been steadfast in its position that they may discuss the pace of the purchases but they are not in a hurry and they want to keep rates lower for longer,” she said.

Indeed, while Fed officials have acknowledged that a discussion about when to begin tapering may soon be in order, they have largely remained committed to extraordinary monetary policy measures, arguing that a pickup in inflation pressures likely proves transitory.

Chief executives from some of largest U.S. banks testified remotely before the Senate Banking Committee on Wednesday, and will appear before the House Financial Services Committee Thursday.

Lawmakers grilled JPMorgan Chase & Co.’s Jamie Dimon, who said he’s worried about “inflation getting out of whack,” while also hearing from Citigroup Inc.’s Jane Fraser, Morgan Stanley’s James Gorman, Bank of America Corp.’s Brian Moynihan, Wells Fargo & Co.’s Charles Scharf, and Goldman Sachs Group Inc.’s David Solomon.

Read: Wall Street CEOs struggle to respond as Senate Democrats voice frustrations about U.S. economic trends

In deal news, Amazon.com  agreed to acquire privately owned MGM Holdings for about $8.45 billion, confirming monthslong speculation and marking the latest in a steady stream of consolidation in the movie and television content business.

Which companies were in focus?

How did other assets fare?

  • The yield on the 10-year Treasury note TMUBMUSD10Y rose 0.9 basis points to around 1.572%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, gained 0.4%.
  • Oil futures closed slightly lower, with West Texas Intermediate crude for July delivery down 11 cents, or 0.2%, to settle at $65.96 a barrel on the New York Mercantile Exchange Gold futures GC00, rose $3.20, or 0.2%, to settle above $1,900 an ounce for the first time since January.
  • The Stoxx Europe 600 index SXXP, closed virtually unchanged on Wednesday, while London’s FTSE 100 UKX finished less than 0.1% lower.
  • The Shanghai Composite SHCOMP climbed 0.3%, while Hong Kong’s Hang Seng Index HSI gained 0.9% and Japan’s Nikkei 225 NIK advanced 0.3%.
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