Stocks rose Monday, briefly pushing the S&P 500 into positive territory for the year, in a mystifying comeback led by technology shares that comes amid still rising coronavirus cases.
The S&P 500 gained 0.7% and was up about 0.1% for the year earlier. Shares of Apple and Amazon rose 0.5% each to drive Monday’s gain. Those two have also been the leaders of the market’s comeback. Pfizer jumped 5% on vaccine developments, also boosting sentiment. The S&P 500 fell from its session high as tech shares cut their gains.
Monday marked the first time since early June that the S&P 500 traded positive year to date. The S&P 500 has also rallied more than 47% from an intraday low set March 23 and traded just 5.2% below a record set in late February.
“The S&P rising back to positive territory for 2020 and aiming at all-time record highs may just be confirming that the economy has entered a new expansion,” said Jim Paulsen, chief investment strategist at The Leuthold Group, in an email. Paulsen added that, while this surge may seem “bizarre” to some, the market has massive amounts of stimulus helping it recover.
“When in the history of the U.S. has such a dramatic and massive economic policy assault (i.e., a $7 trillion Fed balance sheet, 20%+ money supply growth, zero yields and 20%+ net fiscal stimulus as a percent of nominal GDP) been unsuccessful in boosting both the stock market and the economy?” he said.
The Dow Jones Industrial Average jumped 396 points, or 1.5%, and the Nasdaq Composite advanced 0.2%. The Nasdaq-100 — which is made up of the 100-largest nonfinancial companies in the composite — briefly broke above 11,000 for the first time.
It was a broad rally as well on Monday. Nine of the 11 S&P 500 sectors traded higher, with industrials and health care both climbing more than 1.5%.
Vaccine news helping gains
Pfizer and German biotech BioNTech SE were granted fast track designation by the FDA for two of the companies’ four vaccine candidates against the coronavirus. BioNTech jumped 15.2%.
Pfizer and BioNTech said they expect to start the next phase of the vaccine trial later this month with 30,000 subjects. The companies expect to have 100 million doses of a vaccine by the end of 2020 and more than 1.2 billion doses by the end of 2021, according to a release.
The news on BioNTech and Pfizer’s vaccine candidates came after Florida reported 15,299 new coronavirus cases on Sunday, the highest single day total for any U.S. state since the pandemic began. Meanwhile, the U.S. has reported more than 60,000 new cases daily for three days in a row now, bringing the national total to more than 3 million cases, according to data from Johns Hopkins University.
Tech shares up again
Key technology shares climbed, continuing their amazing run as investors bet on their resilience during the coronavirus. Facebook, Amazon and Netflix were higher with Apple.
Apple is now up 35% for the year. Amazon shares have gained 79% in 2020. Netflix is also up more than 70% for the year.
“Right now, this is the favored group” in the market, said Quincy Krosby, chief market strategist at Prudential Financial. “It’s considered the bulwark for the market. It’s the part of the market where investors feel confident that, if growth stalls, these companies will still outperform.”
Tesla jumped more than 12% to an all-time high, making it the 10th-biggest U.S. stock by market capitalization, before the stock lost steam. Analysts at Wedbush and Morgan Stanley raised their price targets on Apple, sending the stock up 1.9%.
Chip stocks increased after Analog Devices offered to buy Maxim Integrated in a $21 billion all-stock deal. Maxim jumped 11%.
The Dow and the S&P 500 are coming off two consecutive weeks of gains, while the resilience in tech shares pushed the Nasdaq to a new record after three straight positive weeks. For July, the Dow and the S&P 500 have risen 1.0% and 2.7%, respectively. The tech-heavy Nasdaq outperformed, climbing 10.7% this month as Amazon, Apple, Netflix, Alphabet all reclaimed new highs.
“The overall rally is still very narrow…and several of the high flying mega-cap stocks are becoming overbought (and more over-valued),” Matthew Maley, chief market strategist at Miller Tabak, said in a note on Sunday. “Therefore, we HAVE to wait to see if the key resistance level on the S&P is indeed broken to the upside before we can confirm that another rally leg in the broad stock market has begun.”
Stocks with earnings rising
Earnings season kicked off on Monday with PepsiCo reporting better-than-expected results. The stock climbed more than 1%. JPMorgan, Citigroup and Wells Fargo are scheduled to report on Tuesday.
JPMorgan shares rose 2%.
Corporate profits are expected to fall by 44% in the second quarter, which would be the biggest drop in quarterly earnings since the fourth quarter of 2008, according to Refinitiv data. However, the market could shrug off the sharp profit decline as long as companies signal a recovery on the horizon.
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