Stocks rose slightly Friday, with big tech stocks leading the way. The market was somewhat risk-off.
The S&P 500 rose as much as much as 0.2%, aided by the up-move in the large-cap tech components of the Nasdaq, which rose as much as 0.5%. The 10-Year Treasury yield fell to 0.68%. Yields fall when prices rise. The yield has had trouble rising from the current range of around 0.66% to 0.71%, as the Federal Reserve has made it clear that it will not even consider raising interest rates until 2024, a policy highly supportive of stocks, but indicative of a weak economic environment post-rebound from the pandemic. The yield offers no return over inflation. The price of crude oil fell 0.5% to $40 a barrel. Gold prices rose a tick.
FAANG stocks and large cap growth software giants Microsoft MSFT and Salesforce CRM, which collectively comprise close to 30% of the S&P 500, rose a tick under 1%, before some fell narrowly into the red. Big tech is well into corruption territory since Sept. 2 as investors re-rate valuations on the group, which has run-up substantially this year. These at-home services, which are largely high-growth secular trends uncorrelated to the economic cycle, have seen accelerated customer adoption this year, in turn forcing investors to reconsider estimates for later years, as massive amounts of demand may have been pulled forward. Friday, investors seemed to be buying the dip.
Social media stocks shined, with Facebook (FB) - Get Meta Platforms Inc. Class A Report and Snap (SNAP) - Get Snap, Inc. Class A Report up 1.3 % and 0.3%, respectively. The Trump Administration said Chinese-owned social media app TikTok will be banned in the U.S. starting Sunday if Oracle and TikTok cannot finalize their deal. TikTok’s absence from taking user share in the U.S. would be viewed as beneficial to U.S. social media companies. Oracle (ORLC) shares fell in premarket trading, before rising slightly at the open.
Economically-sensitive stocks were exhibiting more muted moves. Consumer discretionary was mixed with airlines down. Bank stocks were largely flat-to-down as were oil stocks. Manufacturing was showing slightly more strength.
Investors are awaiting more fiscal stimulus, which played a key role in the employment consumer spending rebound this year. Interest rates are near rock-bottom levels and many small businesses are still closed and in need of liquidity. To date, the economic rebound has been fierce, keeping some investors engaged in the stock market. "Fiscal disappointment would threaten floor of SPX 3300-3600 range, boost vol & defensives pre-election," wrote Strategists at Bank of America Global Research in a note, meaning insufficient fiscal stimulus could send cyclical stocks down and defensive ones like consumer staples up.
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