The major U.S. stock indices rose Wednesday, but only on the strength of growth tech stocks.
The S&P 500 rose 0.75%, pulled higher by the components of the tech-heavy Nasdaq, up 1.5%. Positively, the 10-Year Treasury held rose to 0.71%, with the yield previously below the rate at which inflation has been running of late.
But economically-sensitive stocks were stuck in the mud, with most cyclical sectors down. Large cap consumer discretionary, oil and banking were down more than 0.5% at some points by midday, even though the expanding yield curve is a positive for bank profitability.
The economy needs fiscal stimulus as interest rates will not fall much from here, excluding the faint possibility of negative interest rates. Recent employment and consumer spend data have been weaker than their overall trends starting in April. Congress is on break and fiscal stimulus won’t be implemented until at least September, while small businesses and households look to conserve cash.
Lifting the indices were large cap tech and FAANG stocks up more than 2%. Tesla (TSLA) - Get Tesla Inc. Report and Apple (AAPL) - Get Apple Inc. Report have stock splits coming up, which make the share price more affordable for retail investors. "you get tons of traders front running [the stock split]," Managing Director at TJM Brokerage Tim Anderson told TheStreet, meaning that traders are buying up these stocks in anticipation of a share price pop upon the stock split.
But also lifting the indices were software stocks, large and smaller-sized.
The now $245 billion by market cap Salesforce (CRM) - Get Salesforce Inc. Report rose 25% to $270 a share after posting revenue of over $5 billion on its earnings report, against estimates of $4.9 billion. Strong operating leverage enabled and adjusted earnings per share beat by over 100%. Raised guidance for the full year gave investors even more confidence. Analysts are raising their price targets and mentioning the pandemic may have a hand in accelerating demand for these enterprise software services.