Stocks rallied, with gains outstripping value by a wide margin, which propelled growth
S&P 500 Index
to a new high. Interest rates continued to decline, fueling trading activity.
Dow Jones Industrial Average
rose 57.31 points, or 0.17%, to close at 33,503.57. The S&P 500 Index added 17.22 points, or 0.42%, to a record 4097.17 points.
rose 140.47, or 1.03%, to 13,829.31. The largest player in the S&P 500 is the fast-growing online artisan market.
(ticker: ETSY), which gained 5.6%.
The 10-year Treasury yield fell to 1.63% from Wednesday’s close of 1.67%. This has resulted in fast-growing stocks that will not be making big profits in a few years, making their valuations very sensitive to changes in interest rates. AT
the index of high-cap tech stocks rose 1%.
(GOOGL), two important components of the index, showed on Thursday that stocks were setting new records.
Despite Thursday’s plunge, 10-year bond yields have nearly doubled this year, driven by higher inflation and economic demand as the economy recovers from the pandemic. Many rallies have been hit hard this year, while value companies, which tend to see profits from a stronger economy, are now hot.
On Thursday, rates faded into the background and cost did the same. Therefore, it should come as no surprise that the Dow Jones lags behind other indices as it is highly value-driven. AT
Vanguard S&P 500 price
ETF (VOOV) was down 0.1%. It is up 14% this year, nearly double the Nasdaq 100’s percentage gain.
The fall in rates was facilitated by a small number of applications for unemployment benefits. Initial claims for the week were 744,000, worse than the 694,000 expected. Of course, according to economists at Citigroup, New York and California have made huge contributions to the large number of jobless claims. With the exception of these two states, the rest of the country has dropped 43,000 total claims. This is a positive figure for investors, but it is not interesting to see the claims grow every week.
“The surge in jobless claims is disappointing but does not change our view that we will see huge job growth in the next few months as the economy continues to open up,” wrote Jeff Buchbinder, equity strategist for LPL Financial, in a letter to press. This is part of the value argument.
But the economic picture is still strong, and many believe that value is bound to return to outperforming growth.
In terms of growth, interest rates are likely to rise. The yield on 10-year Treasury bonds is still below the expected inflation rate – usually higher than that – which means that the yield has more room to grow. This means more potential loss for growth.
“We want to try to address the growing question of whether it’s time to overload technology again,” wrote Tom Essay, founder of Sevens Report Research. “To put it simply, we still think the answer is no. The essay added that yields are likely to take a break before resuming growth.
Write to Jacob Sonenshine, [email protected]