Dow Trickles From Record Highs as Investors Back Cyclicals, Dump Tech

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By Yasin Ebrahim – The Dow remained supported after hitting intraday record highs Monday, as investors added to bets on economically sensitive cyclical stocks, but turned away from tech stocks on fears over the threat for inflation and rising rates.

The rose 0.67%, or 231, but had hit an intraday high of 35,091.56 . The was down 0.2%, and the slumped 1.5%.

Cyclicals made a strong start to the week, with financials, industrials and energy in the ascendency amid ongoing optimism the economic rebound will continue to gather pace despite last week’s softer labor market report. 

Energy stocks, however, did lose some of their early steam, after oil prices cut gains despite ongoing supply disruptions following a cyberattack on the country’s largest fuel pipeline, Colonial Pipeline.

“With the capacity to transport 2.5 million barrels of gasoline and other oil products per day, the affected pipelines supply almost half of the fuel needed on the US East Coast,” Commerzbank (DE:) said.

Big tech, meanwhile, was under pressure as investors shied away from high growth stocks on fears the pace of inflation is set to continue that will eventually force the Federal Reserve to tightened policy.

Google-parent Alphabet (NASDAQ:), and Facebook (NASDAQ:), were downgraded to neutral from buy by Citigroup (NYSE:) on worries that ad-revenue growth is set to wane. 

“[A]d-growth will likely decelerate after 2Q21 (on tougher comps). Historically, that usually isn’t bullish for multiples. As such, we downgrade GOOGL and FB to neutral,” Citigroup said.

But others on Wall Street are not so sure that big tech has had its day in the sun.

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“With worries around peak tech earnings, it’s as ‘good as it gets philosophy,’ macro inflation/rate jitters, and work from home tailing off as vaccine deployment looks to be hitting the masses, we are seeing multiples compress across the tech sector,” Wedbush said.

“However massive growth (and further multiple expansion) is still on the horizon with tech stocks underestimating this surge of demand for the next 2-3 years,” it added.

As the quarterly earnings season draws to a close, investors continued to cheer mostly bullish quarterly earnings from corporates.

BioNTech SE (NASDAQ:) reported better-than-expected profit and revenue in the first quarter, and said that there was no evidence to suggest that it would need to update its Covid-19 vaccine for emerging variants of the virus.

Tyson Foods (NYSE:), reported first-quarter results on both the top and bottom lines, but flagged headwinds for its chicken business. Its shares fell 1%.

Marriott International (NASDAQ:) reported mixed first-quarter results as earnings beat, but revenue fell below expectations. The company did, however, tout optimism ahead, pointing to increased demand as the rollout of vaccines continues.

About 86% of S&P 500 companies that reported earnings through May 7 have beaten analysts’ estimates for earnings per share, and 76% have reported a positive revenue surprise, FactSet said. 



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