Wall Street Surges, But Tempered By Dipping Tech Stocks

Stocks edged higher in morning trading on Wall Street Tuesday as traders gear up for economic reports and company earnings to resume after the year-end holidays.

The S&P 500 rose 0.3% as of 10:20 a.m. Eastern. The Dow Jones Industrial Average rose 299 points, or 0.8%, to 36,883 and the tech-heavy Nasdaq fell 0.7%.

US crude oil prices rose 1.6% and helped lift energy stocks. Exxon Mobil rose 3%. Banks were biggest gainers as bond yields again moved higher. Higher bond yields allow banks to charge more lucrative interest on loans. The yield on the 10-year Treasury rose to 1.67% from 1.63% late Monday. JPMorgan Chase rose 3.5%.


A wide range of industrial and communications stocks also reaped gains. Health care and technology stocks fell and tempered the broader market’s gains.

Investors have a mix of economic and corporate news to focus on in the first week of the new year as they try to gauge economic growth with the pandemic and persistently rising inflation.

Wall Street is also monitoring updates this week on the manufacturing and service sectors. The Labour Department’s closely watched jobs report, for December, will be released Friday. Investors are also anticipating the minutes from the Federal Reserve’s latest policy meeting in December, set for release on Wednesday.

The central bank plans to hasten the withdrawal of its support for the markets and economy in the face of rising inflation. It will speed up its withdrawal of bond purchases that have helped keep interest rates low and investors are closely watching the Fed for any signals on eventually raising benchmark interest rates.

As for market reactions, the US dollar chops as the tech tide goes out. Market observers tend to think that financial flows into tech stocks and US stocks in general are a larger factor driving the US dollar than assumed.

The Nasdaq is down today. There’s a bit of a tech smile in the dollar where if tech goes down moderately, like it did earlier, then the dollar falls, but if it really hits the skids, like it is now, then the dollar rallies on risk aversion.

Another thing to consider with the dollar is global growth, since strong EM growth and strong global growth is a headwind indicating much money chasing bonds across borders, aside from Japan.

JPMorgan this week had a great chart showing international GDP growth against US GDP growth charted with the dollar. There’s a correlation but it is clearer than investors would have thought over the long term.

More importantly, there are an abundance of reasons to expect the gap to open wider in a USD-negative way in the coming months.