Stocks maintained their strong gains midday Monday. All three major U.S. indices rose, with the tech-heavy Nasdaq up 2% and the S&P 500 maintaining its 1.3% gain from the morning. The 10-Year Treasury yield rose to 0.69%, down from the morning’s move to 0.7%. Economically-sensitive sectors were participating in the rally, except for oil, which fell slightly by midday.
Tech stocks, which investors often favor when economic worries hit, led. The NYSE FANG index rose 1.4%, but the iShares PHLX Semiconductor ETF (SOXX) - Get iShares PHLX Semiconductor ETF Report accelerated to 2.9%, as analysts pointed out that the month of May saw 6.5% year-over-year growth in chips sales. Many chip manufacturers are exposed to positive trends like 5G devices and cloud and data center growth. The NYSE FANG Index rose 4.5%. Both of these indices have large market cap weightings in the S&P 500.
Cyclical stocks rose considerably as well. Retail, banking and industrials were all rising around 1%. And after the ISM Non-Manufacturing survey, which tracks services, showed a reading of 57.1 (above 50 represents year-over-year growth), cyclical stocks related to the survey rose substantially. Last month’s reading was a contractionary 45. The S&P Construction Materials index rose 1.5%, beating the S&P 500. Lennar Homes (LEN) - Get Lennar Corporation Class A Report, a home construction company, rose 2%. Redfin (RDFN) - Get Redfin Corporation Report, a real-estate brokerage firm, rose 3%.
Investors are also encouraged by the prospect of continued fiscal stimulus. Billions of dollars of monetary stimulus is flowing though the system daily, but interest rates cannot fall much from here and the size of the monetary programs may not expand much. Fresh cash injections to households and small businesses have already proven to be highly productive while the economy was largely shut down.