By Yasin Ebrahim
Investing.com – The S&P 500 lost gains Tuesday as the energy-driven surge in value stocks was offset by weakness in technology and healthcare.
The S&P 500 fell 0.03%, the Dow Jones Industrial Average rose 0.17%, or 60 points, and the Nasdaq Composite lost 0.06%.
Energy surged more than 4% as US oil prices rose to their highest level since October 2018, betting on rising energy demand after OPEC and its allies reportedly agreed to cut production by about 450,000 barrels each from July Day increase.
Financial stocks, particularly banks, benefited from an increase in government bond yields, which tended to boost banks’ interest income.
JPMorgan Chase & Co (NYSE: JPM), Wells Fargo (NYSE: WFC) and Bank of America (NYSE: BAC) were up more than 1%.
The strong start to the shortened trading week for cyclical stocks comes as investors continue to bet that the economy has plenty of room to grow.
“Strong economic growth prospects are driving us into a cyclical bias. We prefer the communications services, energy, financial, industrial and materials sectors,” said Wells Fargo.
However, some have warned against making overly bullish bets that a strong economy will drive stocks higher.
“Last year we had this huge divergence between what was happening in the economy and what was happening in the stock market,” Phillip Toews, CEO & portfolio manager of Toews Asset Management, told Investing.com on Tuesday. “I think this is worth paying attention to because there is not necessarily a connection between a growing economy and a rising stock market.”
The broader market, meanwhile, could also have a tough road ahead of them if the ongoing rotation from growth to value continues to hold technology in check in an overvalued market that has been dynamically driven.
“We’re overrated … the focus should be on ratings, and they’re high,” added Toews. “When the technology eventually suffers and turns into a bigger bear market, it will pull the rest of the market down.”
The story goes on
Apple (NASDAQ: AAPL) and Google parent Alphabet (NASDAQ: Brille) traded lower, while Amazon.com (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT) and Facebook (NASDAQ: FB) were mixed.
Tech continues to be driven by expectations for US Treasury yields while an ongoing debate over whether inflation is temporary continues.
The Federal Reserve has maintained its stance that the factors driving the rise in inflation are temporary, but some market participants, including Allianz (DE: ALVG) chief economic advisor Mohamed El-Erian, warned again Tuesday that the Fed lagging behind the curve and ultimately may be forced to withhold accommodative monetary policy more aggressively and sooner than many expect.
“I would agree with El-Erian that capacity problems and supply shortages are all signs of classic inflation,” Toews added. “Usually the Fed has been very concerned about making sure it is in front of them [inflation] And now they are not. ”“ The Fed is so used to supporting the economy that it may not balance it enough on the other side of the equation [in terms of inflation] that is one of their mandates. “
Healthcare, meanwhile, was dragged down more than 1% by a slump at Abbott Laboratories (NYSE: ABT), Thermo Fisher Scientific (NYSE: TMO) and Danaher (NYSE: DHR).
Reddit meme trading, meanwhile, resumed where it left off last week, led by a 21% increase in the AMC, despite the fact that the theater chain sold 8.5 million common shares to Mudrick Capital Management and sold about $ 230.5 million Brought in dollars.
In other news, Cloudera (NYSE: CLDR) is up 20% after private equity firms KKR and Clayton Dubilier & Rice reached a deal to buy the company for approximately $ 5.3 billion.
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