Wall Street rally pauses as big tech loses steam

FILE PHOTO: Traders wearing masks work, on the first day of in person trading since the closure during the outbreak of the coronavirus disease (COVID-19) on the floor at the NYSE in New York
Traders wearing masks work on the floor at the New York Stock Exchange in New York.
REUTERS/Brendan McDermid/File Photo

By Herbert Lash

The S&P 500 and the Nasdaq edged slightly lower from record levels on Wednesday as energy and financials rose but some big tech stocks limited gains amid an ongoing rotation of portfolio holdings.

Remarks by Federal Reserve Chairman Jerome Powell, who reassured investors interest rates will remain low for some time to spur the economy and jobs growth, provided no new insights on the U.S. central bank’s stance on monetary policy.

Powell is reiterating the Fed’s stance on staying with interest rates where they are until you see sustained inflation, said Jason Pride, chief investment officer for Private Wealth at Glenmede in Philadelphia. “I don’t think anything coming out there is surprising.”

A wave of selling in high-riding Tesla Inc’s and lesser declines in Amazon.com Inc’s, Microsoft Corp and Apple Inc pulled the Nasdaq down and weighed the most on the S&P 500.

The consumer discretionary index was the biggest drag on the S&P, with information technology another drag. On the upside, energy and financials rose.

A broadening of market leadership is underway with the focus on big tech easing off and sectors such as energy and financials gaining traction, said David Bahnsen, chief investment officer at The Bahnsen Group in Newport Beach, California.

“Is the whole market still reliant on big tech as it clearly was last summer? I think the answer is increasingly becoming ‘no,’ you’re seeing a broadening of market leadership,” Bahnsen said. “You have over 75% of the S&P 500 trading above its 200-day moving average. That’s remarkable breadth.”

The Russell 1000 value index, which is heavily weighted towards cyclical sectors, rose while its growth index, comprising large tech companies, fell.

Shares of cannabis companies soared as the Reddit forum that pushed GameStop to record levels late last month extended a months-long rally on bets of decriminalization under the administration of U.S. President Joe Biden.

Wall Street’s fear gauge spiked to a one-week high of 23.85 points before paring some gains.

Twitter Inc rallied after it forecast a strong start to 2021 as ad spending rebounds from a rock bottom.

The social media platform has thought about whether to hold bitcoin on its balance sheet, but it has not made any changes yet, Chief Financial Officer Ned Segal told CNBC.

“The big question is sensitivity to valuation,” said Bahnsen, adding that at 23 to 25 times forward earnings there’s no question certain stocks are highly valued.

Unofficially, the Dow Jones Industrial Average rose 62.57 points, or 0.2%, to 31,438.4, the S&P 500 lost 1.31 points, or 0.03%, to 3,909.92 and the Nasdaq Composite dropped 35.16 points, or 0.25%, to 13,972.53.

Data on Wednesday showed U.S. consumer prices rose moderately in January but underlying inflation remained benign amid a pandemic that has fractured the labor market and services industry.

Fourth-quarter earnings have so far also exceeded expectations, supporting sentiment.

Lyft Inc jumped after the ride-hailing firm said it is chopping costs and now expects to be profitable in the third quarter.


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