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Dow Jones Climbs to a New Record as Tech Sector Drops

Apple revenue up 54% to a new March quarter record. Facebook shares rise 6% to a new all-time high in pre-market trading.

SageFX - May, 06, 21

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Principal Points

  • Dow Jones Industrial Average closes at a new high, its 22nd for the year
  • Futures on Thursday remain flat, Dow futures point higher in pre-market hours

Main benchmark indexes diverged for another day on Wednesday as the Dow Jones Industrial Average climbed on reopening expectations, while the Nasdaq Composite slid for a seventh-straight day dragged lower by tech weakness.

The 30-stock blue-chip index rose to another all-time record yesterday, boosted by stocks positioned to appreciate from the economic recovery across the states. The continuing strong earnings season contributed to the move up, as well as the receding fears of rising interest rates.

The Dow Jones ticked higher by 0.29%, or 97.31 points, to finish the session at 34,230.34. The close on Wednesday was Dow’s 22nd record close of the year. The next higher close will mark the most in a single year since 2017, in which the index closed higher 71 times.

The S&P500 index inched moderately to the upside, adding 0.07%, or 2.93 points, to 4,167.59. The Nasdaq Composite lost 0.37%, or 51.08 points, to 13,582.42. The technology-driven index continued its move to the downside as the economy is healing from the pandemic-induced slowdown and reopening stocks are in fashion, while tech stocks remain pressured. Big tech names declined, among them Facebook, down 1%, and Microsoft, down 0.5%. Netflix lost 1.4%, while Amazon dropped 1.2%.

Investors Keep an Eye on Interest Rates

The current positive macro environment was reinforced yesterday, following a slip-up by Treasury Secretary Janet Yellen on Tuesday. After she commented that interest rates may have to rise to keep the economy from overheating, she walked back her statement and reassured the Federal Reserve is adequately handling the economic recovery. Ms. Yellen aligned with the Fed’s position that inflationary pressures are not likely to present a problem. She clarified that she was neither predicting nor recommending higher interest rates.

Investors pay close attention to the Federal Reserve’s steps to support the economy. The central bank’s $120bn bond purchases a month are helping to sustain the stock-market rally. On the other hand, market participants also watch for signs of rising interest rates that will most likely be introduced if the economy runs too hot to be handled.

Meanwhile, Jeff Bezos, the departing CEO of Amazon, sold more than $2.5bn worth of Amazon shares in the past couple of days, according to securities filings. The sales of roughly 730,000 shares in Amazon stock come a week after the tech giant revealed record-breaking financial results for the first quarter of 2021. The sale of the shares is Bezos’ largest offloading this year after he sold over $10bn worth of shares in 2020. Jeff Bezos, who will step down as Amazon CEO in the third quarter of this year, holds more than 10% of Amazon’s total stock.

On Thursday, following Dow’s record close, US stock index futures are little changed during pre-market trading. Futures tied to the Dow Jones are modestly higher by less than 0.1%, while S&P500 futures and Nasdaq futures are virtually flat ahead of the opening.