U.S. stocks traded modestly higher early Tuesday, attempting to bounce back after the previous day’s slump which was led by technology stocks.
What are major indexes doing?
- The Dow Jones Industrial Average DJIA, +0.52% rose 85.53 points, or 0.3%, to 34,088.45.
- The S&P 500 SPX, +0.63% was up 16.05 points, or 0.4$, at 4,316.51.
- The Nasdaq Composite COMP, +0.83% rose 80.25 points, or 0.6%, to 14,335.73.
On Monday, a tech sector led selloff knocked the Nasdaq down by 2.1%, leaving it 7.3% below its record finish set on Sept. 7. The Dow Jones Industrial Average fell 324 points, or 0.9%, while the S&P 500 declined 1.3%.
What’s driving the market?
Tech stocks have struggled since Federal Reserve Chairman Jerome Powell indicated last month that the central bank could soon start the tapering of bond purchases and complete it by mid-2022. That helped bring forward expectations for interest rate hikes which can be a negative for fast growing companies as it makes their future cash flows less valuable and in turn makes the popular stocks appear overvalued.
But Dan Ives, a tech sector analyst at Wedbush Securities, says the sector is being unfairly punished.
“We continue to believe this pressure on the tech sector is short-lived with our belief that tech stocks will be up 10%+ into year-end as the tech growth stories are being massively underestimated by the Street in our opinion with [third quarter] earnings a major positive catalyst for the tech sector looking ahead,” said Ives.
Investors said the tech sector appeared overdue for a setback.
“Tech stocks are getting hit more than other parts of the market because tech was more overpriced than other parts of the market,” said David Bahnsen, chief investment officer at The Bahnsen Group, a Newport Beach, Calif.-based asset manager with more than $3 billion in assets under management.
“Tech stocks were most vulnerable for a pullback in recent months, as the sector was priced to perfection, or in some cases, priced well above perfection, and as a result, investors are reassessing the risk-reward trade-off of their portfolio’s tech holdings,” he said.
Meanwhile U.S. Treasury Secretary Janet Yellen said Tuesday that the U.S. would fall into another recession if Congress doesn’t doesn’t move quickly to raise the debt limit. Yellen last week warned that the Treasury Department was likely to exhaust extraordinary measures to keep from defaulting on its debt by Oct. 18 if Congress has not acted to raise or suspend the debt limit.
In U.S. economic data Tuesday, the U.S. international trade deficit rose 4.2% to $73.3 billion in August. The economics calendar also includes data from the services sector, with releases from Markit and the Institute for Supply Management. Fed Vice Chair for Supervision Randal Quarles is due to speak on the Libor transition.
Also in Washington, D.C., former Facebook FB, +1.29% employee Frances Haugen will testify before a Senate subcommittee, saying in prepared testimony that the social-media giant gave priority to profits over safety. Haugen detailed her allegations in a “60 Minutes” interview that aired on CBS Sunday night.
Facebook shares fell nearly 5% Monday, with its troubles compounded after the social-media plaform’s services experienced unprecedented outages for more than six hours Monday. Facebook shares were up more than 1% in premarket trade Tuesday.
Which companies are in focus?
- Johnson & Johnson JNJ, +0.14% said Tuesday it has submitted an amendment to the emergency use authorization it’s seeking from the U.S. Food and Drug Administration for a booster shot of its COVID-19 vaccine with additional data showing it increased protection to 94% against moderate to severe or critical COVID-19 in the U.S. Shares rose 0.4%.
- Shares of PepsiCo Inc. PEP, +0.23% were up 1%, after the snack and beverage giant reported third-quarter profit and revenue that beat expectations, while gross margins declined, and provided an upbeat full-year outlook.
- A federal jury awarded $130 million in damages to former Tesla Inc. TSLA, +1.74% employee Owen Diaz, finding the company subjected him to a racially hostile work environment and failed to take reasonable steps to prevent him from being racially harassed. Tesla shares were up 0.3%.
What are other markets doing?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 1.511% rose 1.9 basis poitns to 1.499%. Yields and bond prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, +0.27%, a measure of the currency against a basked of six major rivals, was up 0.3%.
- Oil futures rose, with the U.S. benchmark CL00, +1.46% up 1.5% after ending Monday at a nearly seven-year high. Gold futures GC00, -0.68% fell 0.7%.
- Bitcoin BTCUSD, +2.60% topped $50,000 Tuesday, for the first time since early September. The crypto changed hands in recent trade at
- In Europe, the Stoxx Europe 600 SXXP, +0.52% rose 0.7% and London’s FTSE 100 UKX, +0.54% advanced 0.6%.
- The Hang Seng Index HSI, +0.28% rose 0.3% in Hong Kong, while Japan’s Nikkei 225 NIK, -2.19% dropped 2.2%.
