Stocks cut gains as tech rally loses steam, Nasdaq turns negative
Stocks rose on Monday, building on a record-setting week, as developments on coronavirus treatments drove the bullish sentiment.
The Dow Jones Industrial Average jumped 245 points, or 0.9%. The S&P 500 climbed 0.6% and hit an all-time high. The Nasdaq was marginally higher after also trading at a record level.
Shares of airlines and cruise operators gained amid the coronavirus treatment developments. United Airlines rose by more than 7% along with Delta and American. Carnival gained 7.2%. Norwegian Cruise Line and Royal Caribbean advanced 8.2 and 3.7%, respectively.
Earlier in the session, shares of Big Tech companies such as Apple and Microsoft led the market gains. However, they rolled over in late-morning trading.
Monday’s moves come as the number of new coronavirus cases continues to decline in the U.S. Since spiking by more than 64,000 cases, the number of new daily infections in the U.S. has not topped 49,000, according to Johns Hopkins University. On Sunday, there were less than 37,000 new confirmed cases, the data showed.
“I think something interesting may evolve in the weeks and months ahead,” said Tom Lee, head of research at Fundstrat Global Advisors, in a note. “I think it is entirely possible that USA COVID-19 cases crash to sub-10,000 in September.”
“The US is soon becoming one of the safest places in the World. And if this is true, capital will also want to seek the US” which means “stocks rise further,” Lee said.
Tim Cook, CEO of Apple, smiles during a demonstration of the newly released Apple products following the launch event at the Steve Jobs Theater in Cupertino, California, September 12, 2018.
Stephen Lam | Reuters
On Sunday, the U.S. Food and Drug Administration issued an emergency use authorization of convalescent plasma for hospitalized Covid-19 patients, a treatment that uses blood plasma donated by people who’ve recovered from the virus.
President Donald Trump said at a news conference Sunday that the plasma treatment cuts the mortality rate by 35%.
The Trump administration is also considering fast-tracking an experimental coronavirus vaccine developed in the U.K. for use in the United States ahead of the nation’s upcoming presidential election, according to a Financial Times report.
Shares of airlines and cruise operators gained amid the coronavirus treatment developments. United Airlines rose by more than 1% along with Delta and Southwest. Carnival gained more than 2%. Norwegian Cruise Line and Royal Caribbean advanced 1.3% each.
A seemingly unstoppable rally in major technology shares last week pushed the S&P 500 to levels above its previous record set before the pandemic. The broad equity benchmark posted its fourth straight positive week and closed at a fresh record on Friday.
Apple jumped more than 8% last week ahead of its 4-for-1 stock split, bringing its 2020 gains to nearly 70%. Those gains continued on Monday.
The tech-heavy Nasdaq gained posted a six-week winning streak and notched its 36th intraday high. The Nasdaq has gained more than 26% this year.
But Bruce Bittles, chief investment strategist at Baird, thinks investors need to be careful as only a small group of stocks is contributing to the market’s rally.
“The S&P 500 and the NASDAQ hit new record highs last week but more stocks were down than up. Typically, the opposite should be true,” Bittles wrote in a note. “In a healthy rising market, the majority of stocks, groups and sectors should be rising along with the averages. On Friday, deteriorating market breadth was exhibited by roughly 200 stocks in the S&P 500 that were up and almost 300 were down.”
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