Dow hits record high on cyclical boost ahead of Fed minutes; tech falls
The Dow index hit a record high on Wednesday as investors traded technology stocks for economic-related cyclical stocks that could benefit from a high-yield environment ahead of the minutes of the Federal Reserve meeting in December.
Seven of the 11 major S&P sectors advanced trading early in the afternoon with value-oriented energy (.SPNY), financial (.SPSY) and materials (.SPLRCM) equities leading.
Tech giants including Apple Inc (AAPL.O), Google owner Alphabet Inc (GOOGL.O), Amazon.com, Meta Platforms (FB.O) and Microsoft Corp (MSFT.O) fell between 0.5% and 2 , 2% to weigh the most on the S&P 500 (.SPX) and Nasdaq (.IXIC) indices.
Growth stocks were also under pressure from a recent rise in US government interest rates, triggered by growing anxiety about the prospect of interest rate hikes by the Fed to curb inflation.
“We are seeing a definite shift from technology as interest rates over the 10 years rise,” said John Lynch, chief investment officer at Comerica Wealth Management.
“You’ve just seen some of these positions relax, but nonetheless, higher market interest rates weigh on technology.”
The US Federal Reserve said last month that it would complete its bond purchase from the 2022 pandemic, signaling at least three rate hikes for the year. Minutes from the meeting will be sent out at 1400 ET / 1900 GMT.
Salesforce.com Inc (CRM.N) fell 5.4% after UBS lowered its rating on the stock to “neutral” from “buy”.
At 12:07 ET the Dow Jones Industrial Average (.DJI) was up 92.07 points, or 0.25%, to 36,891.72, the S&P 500 (.SPX) was down 8.05 points, or 0.17% to 4,785.49 and Composite Nass. .IXIC) decreased 144.08 points or 0.92% to 15,478.64.
Intel Corp jumped 4.1% and was the highest percentage gain on the Dow after Northland Capital Markets upgraded the chipmaker’s stock to “outperform” from “market performance”.
The ADP National Employment report showed that private wages rose by 807,000 jobs last month, more than double what economists polled by Reuters had predicted.
The report comes ahead of the Labor Department’s more comprehensive and closely monitored non-farm pay slips for December Friday.
Peloton Interactive (PTON.O) fell 0.8% after JP Morgan lowered its price target on the fitness firm’s stock amid expectations of weaker demand.
AT&T Inc (TN) rose 3.8% after the U.S. telecommunications company added 880,000 monthly paying phone subscribers in the fourth quarter.
Meanwhile, Citigroup analysts said they now expect the S&P 500 index to touch 5,100 by the end of 2022 amid strong corporate earnings.
Advancing issues exceeded declining by a ratio of 1.17 to 1 on the NYSE. Falling issues exceeded the number of advances by a ratio of 1.38 to 1 on the Nasdaq.
The S&P index recorded 59 new highs in 52 weeks and no new lows, while the Nasdaq recorded 69 new highs and 109 new lows.