S&P 500, Dow start month on strong footing, growth stocks lag
The S&P 500 was nearly flat in Monday afternoon trading, with bank shares falling amid warnings of potential losses from a hedge fund’s default on margin calls, while optimism over the economy limited the day’s declines.
The Dow was higher, with shares of planemaker Boeing Co up 1.9% after the company reached a deal with U.S. budget carrier Southwest Airlines Co for a variant of the 737 MAX aircraft.
Nomura and Credit Suisse are facing billions of dollars in losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls, putting investors on edge about who else might have been caught out.
Shares of Morgan Stanley were down 2.5% after the Financial Times reported it had also sold billions of shares, while the banks index shed about 1.9%.
“There’s still chatter as to whether or not, and which, American banks may be affected. That is a question that’s lurking. But so far the market has taken (the news) in stride essentially,” said Quincy Krosby, chief market strategist at Prudential Financial in Newark, New Jersey.
Optimism about speedy vaccinations and record stimulus, which drove the Dow and the S&P 500 to record closing highs on Friday, helped keep a floor in the market, she said.
The Dow Jones Industrial Average rose 103 points, or 0.31%, to 33,175.88, the S&P 500 lost 4.21 points, or 0.11%, to 3,970.33 and the Nasdaq Composite dropped 102.52 points, or 0.78%, to 13,036.21.
Discovery Inc, ViacomCBS, U.S.-listed shares of Baidu and VIPShop, all linked to Archegos, were lower, extending recent losses.
Wall Street’s fear gauge rose.
The Nasdaq is set to post its first monthly decline in five months while the S&P 500 and Dow are headed for their second consecutive monthly gains.
Declining issues outnumbered advancing ones on the NYSE by a 1.94-to-1 ratio; on Nasdaq, a 3.11-to-1 ratio favored decliners.
The S&P 500 posted 69 new 52-week highs and no new lows; the Nasdaq Composite recorded 81 new highs and 50 new lows.
As of Friday, the S&P 500 utilities sector had a dividend yield of 3.3%, the second-highest among S&P sectors after consumer staples, and well above the 1.5% yield for the S&P 500, according to data from S&P Dow Jones Indices.
Benchmark 10-year note yields were at 1.660% on Friday after reaching a one-year high of 1.754% the week before.
“Utilities is our most preferred bond substitute,” said Bianco.