The Dow Jones Industrial Average rose to its second record high in 2022 on Tuesday, while declines in technology shares weighed on the overall market.
Stocks advanced in economically sensitive sectors including energy, financials and industrial as investors analyzed manufacturing and employment data and focused on rising long-term bond yields.
Meanwhile, a decline in technology stocks helped push the S&P 500 and Nasdaq Composite Indexes lower.
The S&P 500 lost 3.02 points, or 0.1%, to 4,793.54. The Dow Jones Industrial Average rose 214.59 points, or 0.6%, to 36,799.65. The Nasdaq Composite Index fell 210.08 points, or 1.3 percent, to 15,622.72.
Different corners of the stock market diverged as investors examined new data showing expanding US factory activity and a tight labor market.
A survey of the manufacturing sector showed signs that supply chain problems could improve. Separate data showed that the number of times workers quit their jobs rose to a high in November while job opportunities remained near record levels.
In the bond markets, the yield on the 10-year US Treasury rose to 1.666% from 1.628% on Monday. Yields rise as bond prices fall.
The rise in yields “may be a sign that the bond market has more confidence in growth, and the Fed is likely to continue the path of higher rates next year,” said Patrick Kasser, portfolio manager at Brandywine Global Investment Management.
He said these developments are better for stocks linked to economic recovery and worse for growth stocks that are trading at high valuations with expectations of very low rates.
Within the S&P 500, the energy sector advanced 3.5%, the financial sector advanced 2.6%, and the industrial sector advanced 2%. The technology sector fell 1.1%.
Traders tend to pile into tech stocks when economic worries escalate, betting that these stocks can deliver growth. As prospects get brighter, they often turn to companies that can harness themselves in a strong economy.
Investors are also assessing the prevalence of the Omicron variant of Covid-19 as they try to predict how the pandemic will affect the economy in the future. Cases are at a record high in the United States, while the number of hospitalizations is rising, but are still below their epidemiological peak, according to data from Johns Hopkins University.
“Omicron’s moderation, and therefore, the potential for less disruption, and reduced shutdown actions – all of these should directly feed earnings expectations,” said James Athey, Abrdn’s chief investment officer.
Money managers are looking forward to the upcoming earnings season, which kicks off in earnest next week with reports from major financial firms.
Analysts estimate that corporate earnings in the S&P 500 rose 22% in the last quarter of the previous year, according to FactSet. In addition to reflecting on the results, investors will hear clues about how the rapidly spreading new variant of Covid-19 will affect business.
“We think this quarter is going to be strong, but we think guidance for the next quarter could be a little bit more choppy from companies just because of concerns about Omicron,” said Eric Friedman, chief investment officer at US Bank Wealth Management.
Among individual stocks, Apple shares fell $2.31, or 1.3 percent, to $179.70 after the company on Monday briefly touched $3 trillion in market capitalization before closing below that limit. Tesla shares fell $50.19, or 4.2%, to $1,149.59, after jumping 14% on Monday.
The number of travel stocks rose. Royal Caribbean shares rose $1.55, or 1.9 percent, to $82.38. United Airlines shares gained 76 cents, or 1.7%, to $46.25. Shares of Marriott International rose $4.10, or 2.5%, to $168.01.
Ford Motor Co. shares jumped $2.54, or 12%, to $24.31, their highest close since August 2001, after the automaker doubled its goal to build its new electric version of the F-150 pickup truck.
Oil prices rose after Opec and a group of oil producers led by Russia agreed to keep pumping more crude in a bet that the global surge in COVID-19 cases would not dampen demand like previous waves of the virus. Brent crude, the global benchmark, rose 1.3 percent to $80 a barrel.
Offshore, the Stoxx Europe 600 continental index rose 0.8% to close at a record high.
In Asia, the main criteria were mixed. The Shanghai Composite Index fell 0.2% after new data showed that Chinese exports were broadly stagnant last month due to weak foreign demand, even as manufacturing activity rebounded.
Hong Kong’s Hang Seng Index rose 0.1%. Japan’s Nikkei 225 closed 1.8% higher as a weak yen drew investors into the country’s stock market.
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