By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – Shares on Wall Street ended higher on Wednesday, as a selloff in technology-related stocks eased and a rotation into cyclical shares continued after Federal Reserve Chair Jerome Powell’s comments calmed inflation worries.
The Nasdaq index, which traded as much as 1.3% lower earlier in the session, regained its footing by early afternoon and closed higher. The Dow hit a record high earlier in the session.
GameStop Corp stock, which was at the center of volatile moves in late January by shares talked about on a Reddit forum, rose sharply in late trading. Volume was more than two times the 10-day moving average, and shares were halted by the New York Stock Exchange. AMC Entertainment Holdings also jumped.
Powell told lawmakers on Wednesday it may take more than three years to reach the central bank’s inflation goals, a sign the Fed plans to look beyond any post-pandemic spike in prices and leave interest rates unchanged for a long time to come.
“What’s driving the stock market is the fiscal stimulus, the dovish Fed, the real strong, strong earnings that we’re seeing, as well as the fact that we’re going to have a third vaccine,” said Richard Saperstein, chief investment officer at Treasury Partners.
The U.S. Food and Drug Administration said on Wednesday Johnson & Johnson’s one-dose COVID-19 vaccine appeared safe and effective in trials, paving the way for its approval for emergency use as soon as this week.
Johnson & Johnson rose following the news.
Unofficially, the Dow Jones Industrial Average rose 424.51 points, or 1.35%, to 31,961.86, the S&P 500 gained 43.98 points, or 1.13%, to 3,925.35 and the Nasdaq Composite added 132.77 points, or 0.99%, to 13,597.97. All three main indexes were on track to post strong monthly gains, with the Dow and the S&P 500 set for their best month since November.
Investors have focused on rising U.S. yields and their potential impact on growth stocks. Saperstein said higher yields could pressure stocks but would not derail the upward trend.
“I don’t believe that the 10-year yield going from 1% to 1.5% is going to alter the calculus of owning large technology stocks,” said Saperstein.
Value-oriented stocks have enjoyed a bit of a bounce recently, and the S&P 500 Value index rose for a fourth straight day.
The S&P 500 financial sector hit an all-time peak, while other cyclical stocks including industrials, energy and materials also rose.
The S&P 500 Growth index, which includes most of the high-flying technology-related stocks, has come under pressure in the last few days due to valuation concerns, elevated Treasury yields and an investment shift into more economy-sensitive parts of the market.
Microsoft Corp, Amazon.com Inc and Apple Inc were down, while Facebook, Netflix Inc and Alphabet Inc reversed earlier declines.
Growth-oriented stocks are particularly sensitive to rising yields as their value rests heavily on future earnings, which are discounted more deeply when bond returns go up.
Tesla Inc gained after star investor Cathie Wood’s Ark Invest fund bought a further $171 million worth of the company’s shares in the wake of a sharp fall in the electric-car maker’s stock.
Lowe’s Cos Inc slid as it stuck by its 2021 outlook of a $4 billion to $8 billion drop in revenue, even after reporting blow-out fourth quarter results.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Devik Jain and Shreyashi Sanyal in Bengalaru; Editing by Cynthia Osterman)