The S&P and Dow hit record highs on Thursday, powered by a rally in tech stocks and another round of stimulus that investors anticipate will find its way to stocks, keeping the liquidity-driven rally alive.
The Dow Jones Industrial Average rose 0.58%, or 188 points, to a closing record of 32,485.59, the S&P 500 rose 1.44% to close at a record 3,938.23, and the Nasdaq Composite was up 2.5%.
President Biden's $1.9 trillion stimulus bill was signed into law on Thursday. The stimulus package, which includes $1,400 stimulus checks, is expected to add to the well of liquidity that has underpinned the rally since March last year, and exacerbate the trend of too much money chasing too few opportunities.
"We believe this speaks to the power of liquidity in this environment- which as we have been pointing out for the past several months, remains unprecedented in modern history (in effect too much money chasing too little supply)," Janney Montgomery Scott said.
While the markets get ready for another wave of stimulus, investors continue the debate of whether money will be best served in value or growth, though some on Wall Street suggest tech will likely steal the show.
"While it's a 'buckle the seat belt' time for tech stocks, we believe this sell off has created a golden opportunity for investors to own the secular tech winners for the next 3-5 years," Wedbush said in a note. The firm outlined FAANG, cloud, cyber security, 5G, and artificial intelligence stocks to lead the charge higher, underpinned by the growing digital transformation trend that is set to pick up speed.
Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google-parent Alphabet (NASDAQ:GOOGL) were higher, pushing broader market to record highs, with easing fears about a disorderly rise in rates also playing a role in the reviving the growth trade.
The 10-year yield remained above 1.5%, but some market participants are backing rates to remain in check following auction results for the 10-year note on Wednesday that suggested current rates were attractive enough for buyers.
Given the selloff in bond prices, which trade inversely to yields/rates, over the past month, there were concerns that the market wasn't ready to buy bonds anticipating a further run up ahead, but the auction results "seem to be put [those fears] to rest for now," Jefferies (NYSE:JEF) said.
Semiconductor stocks rose more than 4% adding to gains in the broader tech sector as investors appeared to take advantage of the recent beatdown in chip stocks.
But it wasn't all green in tech as Oracle (NYSE:ORCL) fell 7% after its softer guidance offset better-than-expected fourth-quarter results.
During the recent melt-up in rates, intense debate broke out over the catalyst that had pushed yields up at a rapid pace, with some pinning blame on fears over runway inflation, while others suggested the appreciation was sparked by optimism over the economic recovery.
In recent days, fears that inflation would spiral out of control have eased, and data continues to point to an improving economic recovery.
The U.S. Department of Labor reported Thursday that initial jobless claims decreased by 42,000 to 712,000 in the week ended March 6, the lowest since November and above forecasts for decline to 725,000.
Cyclical stocks – those that move in tandem with the economy – ended the day mixed with financials and energy paring intraday gains.
In other news, Bumble (NASDAQ:BMBL) reported its maiden quarterly report and guidance on Wednesday that topped Wall Street expectations, sending its shares 11% higher.