Wall Street in sharp rally due to surge in financial and technology stocks
Wall Street stock rallied sharply on Wednesday, with the benchmark S&P 500 index scoring its biggest one-day percentage gain in about two months, as financial and technology stocks led a broad market rebound.
The Nasdaq posted its best session since November 7, the day before the US presidential election.
The S&P 500 had suffered its biggest one-day drop in about six weeks on Tuesday after a health care bill was delayed in the US Senate.
The health care legislation is the first major plank of President Trump’s domestic policy agenda, with investors eager for him to move onto his other plans including tax cuts, infrastructure spending and deregulation.
Investors may be re-evaluating the impact of the Senate’s delay on the market and Trump’s agenda, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
“The market has had trouble really appreciating, but it has had even more trouble declining,” Meckler said. “It seems like any negative period is very quickly met with new buyers.”
“Interest rates are still very low and a lot of investors see little opportunity to invest anywhere but in stocks,” he added.
The Dow Jones Industrial Average rose 143.95 points, or 0.68 per cent, to 21,454.61, the S&P 500 gained 21.31 points, or 0.88 per cent, to 2,440.69 and the Nasdaq Composite added 87.79 points, or 1.43 per cent, to 6,234.41. The small-cap Russell 2000 ended up 1.6 per cent.
Financials were the best performing S&P sector, rising 1.6 per cent.
Bank stocks including JP Morgan Chase and Bank of America helped boost the S&P 500, both rising more than 2.0 per cent. The interest rate-sensitive group was helped by an increase in yields for 10-year Treasuries and by a widening spread between shorter- and longer-dated US bonds.
“We have had the statements from various Fed officials that they are still on board with the tightening cycle and that has been a big driver for finance names,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC in Lisle, Illinois.
Bank stocks also were higher ahead of stress test results from the Federal Reserve and added to those gains in after-hours trading as the Fed approved plans from the 34 largest US banks to use extra capital for stock buybacks, dividends and other purposes.
Tech stocks gained 1.3 per cent, surging back from their worst day in more than two weeks. The sector has led the S&P 500’s 9-per cent gain this year, but has pulled back recently as some investors question whether the group is too expensive. The tech-heavy Nasdaq bounced off its 50-day moving average.
With second-quarter US corporate earnings reporting set to begin in earnest in July, investors are looking for results to support equity valuations. The S&P 500 is trading at nearly 18 times forward earnings estimates, above its long-term average of 15 times.
In earnings news, General Mills shares rose 1.6 per cent after the Cheerios cereal maker reported a better-than-expected quarterly profit.
Staples shares rose 8.4 per cent. The company will announce its sale to private equity firm Sycamore Partners, a person familiar with the matter said on condition of anonymity.