NEW YORK: The heavyweight technology and growth stocks that drove Wall Street higher in recent years are again fueling a surge that has taken the Nasdaq from a brutal selloff to an intraday record high in just 11 weeks, as investors look beyond the economic upheaval caused by the coronavirus.
The Nasdaq's 43% rise since late March puts the tech-heavy index far ahead of the broader S&P 500, highlighting investors' willingness to bet that tech and communication companies will emerge stronger from the pandemic.
The Nasdaq index on Friday closed 2.06% higher on the day after earlier surpassing the previous intraday record high hit Feb. 19, just before fears of the coronavirus ended Wall Street's 11-year bull market. The Nasdaq on Friday ended just short of its record high closing level, also set Feb. 19.
The Nasdaq's intraday high on Friday came after the monthly payrolls report surprised investors with the addition of 2.5 million jobs in May, providing the clearest evidence yet that the U.S. economy is headed for a quicker-than-anticipated recovery from lockdowns designed to contain the coronavirus outbreak. Even so, the road to recovery could be long and the jobless rate, at 13.3% last month, remains high, and many businesses are not expected to survive.
Many investors in recent months have bet that massive corporations with robust balance sheets will build on competitive advantages and grab market share from smaller rivals struggling to survive the global health crisis.
Microsoft , Apple and Alphabet have outperformed moststocks within the Nasdaq, while Amazon and Facebook have set record highs in recent weeks. Their strong performance has increased the group's concentration within the Nasdaq, extending a trend seen in recent years.
(Since Feb. 19, the end of the previous Nasdaq bull market, Amazon's stock market value has increased by over $150 billion, far more than any other U.S. company, as investors bet that shopping will move further online and that Amazon's cloud computing business will grow quickly. Alphabet, still down 6% since Feb. 19, has lost about $25 billion, more than any other U.S. company, according to Refinitiv data. Microsoft and Apple are Wall Street's most valuable companies.
Due to the cloudy economic outlook, many companies in recent months have withdrawn or declined to provide earnings guidance, making it difficult for investors to value stocks based on future earnings. Still, the Nasdaq currently trades at a trailing price/earnings multiple of 31, a level last seen in 2004 in the wake of the bursting of the dot-com bubble.
Meanwhile Wall Street rallied to end higher on surprise US jobs report
Wall Street surged on Friday after a strikingly upbeat May jobs report unexpectedly provided the clearest evidence yet that the U.S. economy is headed for a quicker-than-anticipated recovery.
The Nasdaq breached its all-time closing high reached in February but pared its gains to end the session a hair's breadth below it. All three major U.S. stock indexes advanced 2% or more.
The S&P 500 and the Dow are now 5.7% and 8.3% below their respective closing records.
The benchmark S&P 500 is now 1.1% below its year-to-date break-even level.
The U.S. economy added a remarkable 2.5 million jobs last month, rebounding from April's record 20.7 million drop and pushing the unemployment rate down to 13.3%. Analysts saw unemployment soaring to a historic 19.8%.
"The numbers are a huge surprise to the upside," said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.
"It would suggest a further confirmation the economy is coming back online," Arone added. "This is a strong signal that the effects are temporary and that the economy is improving."
"Long may it last."
U.S. Treasury yields rose on the jobs data, giving a boost to interest rate-sensitive banks and sending the S&P 500 Banks index up 4.9%.
Airlines, among the hardest hit by the coronavirus crisis, soared, with the ARCA Airlines index jumping 5.7%.
But the World Health Organization warned that the COVID-19 pandemic, which brought the global economy to its knees in the wake of mandated shutdowns, is far from over and new cases are on the rise.
Market participants now turn their focus to the U.S. Federal Reserve, which holds a monetary policy meeting next week where the latest jobs data will almost certainly be discussed.
The Dow Jones Industrial Average rose 829.16 points, or 3.15%, to 27,110.98, the S&P 500 gained 81.58 points, or 2.62%, to 3,193.93 and the Nasdaq Composite added 198.27 points, or 2.06%, to 9,814.08.
All 11 major sectors of the S&P 500 ended the session well in the black, with energy, financials and industrials leading the gainers in a continuation of a rotation into cyclicals, which were beaten up amid economic lockdowns.
Small caps and transportation stocks also outperformed, with the Russell 2000 and Dow Transportation up 3.8% and 3.1%, respectively.
Boeing Co surged 11.5%, giving biggest the blue-chip Dow its biggest boost, on hopes of a pickup in air travel a day after American Airlines Group Inc and United Airlines said they would boost their U.S. flight schedule next month.
Shares of luxury retailer Tiffany & Co jumped 6.5% after Reuters reported LVMH's $16.2-billion takeover deal was back on track.
Drugmaker Novavax Inc advanced 3.7% following its announcement that the U.S. Department of Defense would give it up to $60 million to manufacture its COVID-19 vaccine candidate.
Advancing issues outnumbered declining ones on the NYSE by a 5.03-to-1 ratio; on Nasdaq, a 3.08-to-1 ratio favored advancers.
The S&P 500 posted 26 new 52-week highs and no new lows; the Nasdaq Composite recorded 89 new highs and three new lows.
Volume on U.S. exchanges was 17.56 billion shares, compared with the 12.03 billion average over the last 20 trading days.
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