Tech Shares Edge Up After Falling on Inflation Worries
May 18 2021 - 9:37AM
Dow Jones News
By Will Horner
U.S. stocks hovered near the flatline Tuesday, while technology
shares inched higher and were poised for a modest rebound.
The S&P 500 slipped 0.2% shortly after the opening bell. The
Dow Jones Industrial Average declined 0.3%. The Nasdaq Composite
gained 0.3%, putting technology shares on course to pare some
recent losses.
Stocks have been choppy in recent trading sessions as concerns
about a rise in inflation weighed on sentiment. Investors are
contending with a raft of unknowns, such as whether rising prices
will prove temporary or more persistent, and whether the Federal
Reserve will act by raising interest rates sooner than planned.
"That always was the key risk: central banks taking away the
liquidity punch bowl before the party has ended," said Brian
O'Reilly, head of market strategy for Mediolanum International
Funds.
Inflation ranging between 2% and 4% could be the "sweet spot"
for stocks, said Mr. O'Reilly. The economic rebound that is fueling
inflation is likely to continue benefiting stocks that are
sensitive to the reopening, such as banks, as well as travel and
leisure companies. But companies with strong balance sheets and an
ability to raise prices, such as pharmaceutical companies and
makers of common household goods, should also do well, he said.
"Inflation isn't necessarily bad for equities, but there will be
winners and losers in terms of [which ones] are better at passing
on that inflation to the customer," said Mr. O'Reilly.
While tech stocks have taken the biggest hit from rising
inflation concerns, some investors see the recent retreat as an
opportunity to buy fast-growing companies.
"Within tech, there are still some companies that look very
cheap," said Jane Shoemake, client portfolio manager at Janus
Henderson Investors. "If you believe in the longer-term trends
supporting these companies, you should be buying."
In morning trading, AT&T dropped 6.8%, extending its losses
following a deal with Discovery to merge their media assets into a
new, publicly traded business.
Macy's added 1.5% after reporting first-quarter earnings that
beat expectations. Walmart advanced 3.9% after the retailer lifted
its guidance for the year. Home Depot fell 0.2% after surpassing
earnings expectations.
The yield on the 10-year Treasury note rose to 1.656% from
1.639% Monday. Bond yields rise as prices fall.
Brent crude fell 0.1% to $69.37 a barrel. The global oil
benchmark earlier climbed above $70 a barrel for the second time
since the onset of the pandemic amid hopes for fuel demand.
Overseas, the Stoxx Europe 600 edged up 0.3%. The U.K.'s FTSE
100 gained 0.1% after data showed the U.K.'s unemployment rate
edged lower in April.
Most major Asian indexes closed higher. Japan's Nikkei 225
gained 2.1%, while in Hong Kong, the Hang Seng Index rose 1.4%.
Taiwan's Taiex jumped 5.2%. In mainland China, the Shanghai
Composite Index edged up 0.3%.
-- Amber Burton contributed to this article.
Write to Will Horner at William.Horner@wsj.com
(END) Dow Jones Newswires
May 18, 2021 10:22 ET (14:22 GMT)
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