Monday, investors bought the dip in tech stocks, while value stocks got another vaccine-related shot-in-the-arm. Risk sentiment only strengthened throughout the day.
The S&P 500 rose 1.7%, with the tech-heavy Nasdaq up 2.1%. The 10-Year Treasury yield was flat at 0.67%. Inflation expectations, while muted, are certainly not falling at present, but many point out that the combination of fading supply of new bonds from the Treasury and the Federal Reserve’s overwhelming bid in the Treasury market is supporting the price. In the morning, stocks were up, but mainly less than 1.5% in aggregate.
The Nasdaq is still down more than 9% from its Sept. 2 level, when a valuation re-rating took hold of growth tech stocks. Investors are buying the dip aggressively.
Nvidia (NVDA) - Get NVIDIA Corporation Report will buy the highly-diversified chipmaker Arm for $40 billion from SoftBank. Arm has a focus on smartphone chips. The $300 billion by market Nvidia rose 7%. The iShares PHLX Semiconductor ETF (SOXX) - Get iShares PHLX Semiconductor ETF Report rose 2%.
Pfizer (PFE) - Get Pfizer Inc. Report CEO Albert Bourla told a reporter Sunday that the company could very well have its coronavirus vaccine by the end of 2020 if it gets FDA approval around October. The stock, which is indeed materially impacted by the company’s coronavirus vaccine efforts, rose about 3% by midday, a testament to the market’s position that Bourla’s statement is valid. This lifted cyclicals like retail and apparel, restaurant stocks and airlines. Banking, oil, industrials and materials all rallied.
Valuations are getting stretched, but investors continue to pile into equities with interest rates seemingly unable to budge higher and, as mentioned to TheStreet by Nuveen’s Chief Investment Strategist Brian Nick, yields on cash and savings are negative compared to inflation. This leaves positive news items to push stocks higher, even as the chance of a 'Blue Wave’ election outcome is relatively elevated.
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