Dow up 400 points, while tech shares bounce from Monday selloff

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MARKET SNAPSHOT

U.S. stocks traded higher Tuesday, bouncing back after the previous day’s slump led by the technology sector. Gains were extended after upbeat readings on activity in the U.S. services sector for September as coronavirus delta variant case numbers fall after a surge in the summer.

What are major indexes doing?

  • The Dow Jones Industrial Average rose 403.07 points, or 1.2%, to 34,405.99.
  • The S&P 500 advanced 1.2%, or 51.31 points, to 4,351.77.
  • The Nasdaq Composite rose 180.61 points, or 1.3%, to 14,436.09.

On Monday, a tech sector led selloff knocked the Nasdaq down by 2.1%, leaving it 7.3% below its record finish set on Sept. 7. The Dow Jones Industrial Average fell 324 points, or 0.9%, while the S&P 500 declined 1.3%.

What’s driving the market?

US stocks rebounded Tuesday morning as investors found some value in tech stocks after Monday’s slump, while rising oil and natural gas prices helped energy stocks.  

Tech stocks have struggled since Federal Reserve Chairman Jerome Powell indicated last month that the central bank could soon start the tapering of bond purchases and complete it by mid-2022. That helped bring forward expectations for interest rate hikes which can be a negative for fast growing companies as it makes their future cash flows less valuable and in turn makes the popular stocks appear overvalued.

But Dan Ives, a tech sector analyst at Wedbush Securities, says the sector is being unfairly punished.

“We continue to believe this pressure on the tech sector is short-lived with our belief that tech stocks will be up 10%+ into year-end as the tech growth stories are being massively underestimated by the Street in our opinion with [third quarter] earnings a major positive catalyst for the tech sector looking ahead,” said Ives.

Investors said the tech sector appeared overdue for a setback.

“Tech stocks are getting hit more than other parts of the market because tech was more overpriced than other parts of the market,” said David Bahnsen, chief investment officer at The Bahnsen Group, a Newport Beach, Calif.-based asset manager with more than $3 billion in assets under management.

“Tech stocks were most vulnerable for a pullback in recent months, as the sector was priced to perfection, or in some cases, priced well above perfection, and as a result, investors are reassessing the risk-reward trade-off of their portfolio’s tech holdings,” he said.

In U.S. economic data, the Institute for Supply Management said its services index rose to 61.9 in September from 61.7, coming in above forecast. A reading of more than 50 indicates an expansion in activity. Earlier, the IHS Markit final services purchasing managers index for September came in at 54.9 versus an initial reading of 54.4. Also, the U.S. international trade deficit rose 4.2% to $73.3 billion in August.

However, U.S. Treasury Secretary Janet Yellen said Tuesday that the U.S. would fall into another recession if Congress doesn’t doesn’t move quickly to raise the debt limit. Yellen last week warned that the Treasury Department was likely to exhaust extraordinary measures to keep from defaulting on its debt by Oct. 18 if Congress has not acted to raise or suspend the debt limit.

Fed Vice Chair for Supervision Randal Quarles is due to speak on the Libor transition.

Also in Washington, D.C., former Facebook employee Frances Haugen will testify before a Senate subcommittee, saying in prepared testimony that the social-media giant gave priority to profits over safety. Haugen detailed her allegations in a “60 Minutes” interview that aired on CBS Sunday night.

Facebook shares fell nearly 5% Monday, with its troubles compounded after the social-media plaform’s services experienced unprecedented outages for more than six hours Monday. Facebook shares were up more than 1% in premarket trade Tuesday.

Read: Facebook’s very, very bad day: Services go dark and stock plunges in wake of whistleblower revelations

Which companies are in focus?

  • Johnson & Johnson said Tuesday it has submitted an amendment to the emergency use authorization it’s seeking from the U.S. Food and Drug Administration for a booster shot of its COVID-19 vaccine with additional data showing it increased protection to 94% against moderate to severe or critical COVID-19 in the U.S. Shares rose 0.8%.
  • Shares of PepsiCo Inc. were up 0.2%, after the snack and beverage giant reported third-quarter profit and revenue that beat expectations, while gross margins declined, and provided an upbeat full-year outlook.
  • A federal jury awarded $130 million in damages to former Tesla Inc. employee Owen Diaz, finding the company subjected him to a racially hostile work environment and failed to take reasonable steps to prevent him from being racially harassed. Tesla shares were up 1.1%.
  • Shares of Lordstown Motors Corp. fell more than 6% after the electric-vehicle maker was downgraded to underweight from equal weight by analysts at Morgan Stanley, who cut their price target to $2 a share from $8.

What are other markets doing?

  • The yield on the 10-year Treasury note rose 5.4 basis points to 1.535%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index a measure of the currency against a basked of six major rivals, was up 0.2%.
  • Oil futures rose, with the U.S. benchmark up 1.9% after ending Monday at a nearly seven-year high. Gold futures fell 1%.
  • Bitcoin topped $50,000 Tuesday, for the first time since early September. The crypto changed hands in recent trade at
  • In Europe, the Stoxx Europe 600 rose 1.1% and London’s FTSE 100 advanced 1%.
  • The Hang Seng Index rose 0.3% in Hong Kong, while Japan’s Nikkei 225 dropped 2.2%.
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