Major U.S. indices rose Monday almost exclusively on the back of big tech.
The S&P 500 rose 0.4%, with the tech-heavy Nasdaq up 1.5% and economically sensitive groups of stocks down. Meanwhile, the 10-Year Treasury yield fell to 0.62%, another risk-off signal. Yields fall when prices rise.
With earnings around the corner for Amazon (AMZN) - Get Report, Microsoft (MSFT) - Get Report and Apple (AAPL) - Get Report, among other big tech names, the NYSE FANG Index rose 1.9%. Investors had dumped shares of big tech companies with hight valuation to start July, rotating a bit into the battered cyclical names.
But with upcoming earnings, and some of these companies with a tendency to beat estimates, investors are buyers. And they’re willing — as usual — to pay a hefty premium to own secular growth during economic duress.
On that economic uncertainty, stats are pausing reopenings as virus cases fly seemingly off the charts and questions over more fiscal stimulus longer. Congress is unclear about its will to provide more cheap funds to small businesses and households and interest rates can’t go much lower.
Selling off was large cap banking, industrials, materials, consumer discretionary and oil, some of which were down more than 1%. The Russell 2000, a small cap index, fell a bit less than 1%. Small caps can be hurt badly by economic downturns, as they have limited scale, limited ability to raise debt capital and they can sometimes have already debt laden balance sheets.