Dow Jones Posts a Record, Nasdaq Falls 2%, Enters Correction
In mixed trading US session, Dow Jones jumps to an intraday record high while Nasdaq slides by more than 10% from the top.
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- Dow Jones jumps to an intraday record high
- Nasdaq slides by more than 10% from top
Mixed trading persisted over yesterday’s US session after the Senate passed the stimulus bill worth $1.9tn. At one point, the Dow Jones Industrial Average rallied to an intraday record high by gaining more than 650 points led by stocks related to the reopening of the US economy. The blue-chip benchmark closed Monday session higher by 306.14 points, or 1%, to 31,802.44. Industrials, energy, and materials moved higher while tech stocks were pressured as investors continued their rotation to real-economy sectors.
Monday marks the first trading day after the Senate approved the new coronavirus recovery package and market participants piled into equities that are the most likely to be uplifted by the economic comeback once the stimulus is enacted. President Biden is expected to sign the bill into law before unemployment benefits expire on Mar 14. Financial companies acquired more gains led by Wells Fargo, up 3.3%, and Citigroup, closing higher by 2.8%. Meanwhile, the US continues to see a drop in coronavirus confirmed daily cases, as they slipped below 50,000 on Sunday. In addition, the Centers for Disease Control and Prevention announced on Monday that people who have been fully vaccinated can stay without masks both outdoors and indoors, further advancing the reopening of the economy.
Tech Stocks Lose Gains
The S&P500, at its session high, was up by over 1.00% but efforts to keep it there failed and the broad-based index closed lower by 0.54%, or 20.59 points, to 3,821.35. The Nasdaq composite index skittered down 2.4% as the sell-off in tech stocks continued, pushing giants like Apple and Tesla down by more than 4% each. Apple slid 4.2%, while Tesla fell 5.8%. Alphabet and Netflix are both lower by over 4%. The tech-heavy index is down more than 10% from its all-time high reached on Feb 12, placing it into correction territory.
Disney had some of the best gains yesterday, up 6%, after California relaxed the Covid-19 restrictions. The easing of the measures will allow Disneyland to reopen in April on a limited basis. Airline companies also posted solid gains with American Airlines up roughly 5% and United Airlines higher by 7%.
Tech stocks continued to shed gains acquired during the pandemic lockdown. For the past few weeks, high-growth stocks have been on the losing side. Apple has fallen nearly 19% from its all-time high on Jan 26, while Tesla is down over 36% for the same period. Other stocks that were among the best performers in 2020, Zoom and Peloton, are down 24% and 30%, respectively, for the past month.
The market rotation is producing mixed results across the major averages. For the first trading days in March, the Dow Jones is boosted by reopening hopes and is near an all-time high, while Nasdaq remains pressured, continuing the trend in the last few weeks as tech stocks are particularly vulnerable. The S&P500, for March, is essentially unchanged, higher by 0.3%.
US equity futures on Tuesday rise as Nasdaq is attempting to stage a recovery. Futures tied to the Nasdaq Composite are higher by 1.00% ahead of the opening. Dow futures and S&P futures are also positive.