The Dow Jones Industrial Average hit a record high on Monday as energy stocks rose sharply, building on the benchmark’s recent strong rally. Big tech stocks came under pressure, however, weighing on the Nasdaq Composite.
The blue-chip ad fell 300 points to a record intraday high, compounded by a surge in shares of Dow Inc and Chevron. The S&P 500 traded near the flatline after closing a record in the previous session. The Nasdaq Composite fell 1.5%.
Gasoline futures saw volatile trading after a ransomware attack over the weekend forced the closure of the largest U.S. fuel pipeline. The Colonial Pipeline, which operates a 5,500-mile system, said it was forced to stop transporting fuel from the Gulf Coast to the New York subway region on Friday because “certain systems went offline to serve the Contain the threat “. Colonial said Sunday night that some of its smaller sidelines are back online but that its main lines are still closed.
Gaining stocks of energy stocks including Marathon Oil, Occidental Petroleum and Devon Energy. Chevron gained 1.7%. Exxon was higher too.
However, larger tech stocks fell, hurting sentiment. Tesla fell more than 4%. Facebook fell over 4% while Alphabet fell more than 2% after being downgraded by Citigroup.
“The tech pricing action is particularly frustrating for many as the thought was that Friday would bring a more sustained rebound to space,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “Instead, the group sees aggressive sales and accumulated engineering damage as prices surpass key levels.”
Tech stocks rebounded Friday after a far weaker-than-expected job report in April allied concerns about a policy change in the Federal Reserve. Tech stocks have rallied during the pandemic under the low interest rate regime.
Last week the Dow was up 2.7% and the S&P 500 was up 1.2%. Despite a 0.9% rally in the last session of the week, the Nasdaq Composite lost 1.5% over the same period.
The April job report showed US employers completed 266,000 net payrolls in the last month. Economists polled by Dow Jones had expected 1 million new entrants.
Mike Wilson, chief US equities strategist at Morgan Stanley, noted that traders appear to have already priced in a robust economic reopening due to declining Covid-19 cases. Any news that could threaten this narrative could quickly affect where portfolio managers allocate cash
“We are watching expectations versus reality as the reopening market is now at a good price. Cumulative retail sales are above what it would have been before COVID trends – suggesting some expectation risk associated with the pent-up demand narrative suggesting, “Wilson wrote over the weekend.
“The job market is less loose than usual at this point in the cycle,” he added. “We recommend moving the quality curve up and creating a more defensive balance as the market shifts towards mid-cycle leadership.”
The market will undergo a major test on Wednesday with the release of CPI inflation data. Investors fear a scenario in which the Federal Reserve will be forced to cut its loose monetary policy to contain inflation before the economy has fully recovered from the pandemic.
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