Stock ETFs Gain as Investors Look For Beaten Down Tech Bargains

After pulling back and trading mixed on Tuesday, as investors rotated out of tech stocks, the S&P 500, Nasdaq Composite, and related stock ETFs are showing modest gains in early Wednesday trading, as investors increased allocations in tech, taking advantage of stocks that were battered over the last couple of days.

The S&P 500 climbed 0.81% while Nasdaq improved 1.64%, with Big Tech names like Apple adding 1.9%, and Facebook and Amazon advancing 1.8% and 2.5%, respectively. Tech giant Microsoft also gained 2.3%.

Meanwhile, the Dow struggled out of the three big indices, gaining only 0.29% after falling 24 points earlier in the session. The 30-stock index had a robust start to the week however, buoyed by Pfizer and BioNTech’s announcement of an over 90% effective coronavirus vaccine.
Major stock ETFs are also breaking to higher ground on Wednesday after struggling the prior day. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all advancing just before noon EST.

“An abrupt macro positive shock such as we saw this week can lift all value stocks for a time,” Inigo Fraser-Jenkins, Co-Head of the Portfolio Strategy team at Bernstein, wrote in a note. “However, we think that the outlook for the next year has to be more nuanced.”

“Real yields are likely to be held low and there is still a greater longevity of growth for high Growth companies, thus we think it is right to remain overweight Growth companies where [it is reasonable]to believe their growth can be sustained,” Fraser-Jenkins said.

Investors cheered as Eli Lilly’s antibody drug was granted clearance by the FDA for emergency use late Monday. The Food And Drug Administration noted the drug could be available to help with mild-to-moderate cases of coronavirus in patients who are older than 12 years old.

While tech has been leading the recovery for most of 2020, the vaccine announce compelled investors to transition out of technology names and stocks that would benefit from continued work-at-home conditions, and into cyclical stocks that stand to gain from a healing economy, like energy, oil, financials, and airlines.

The energy sector is up 17% this week, as oil prices rally on optimism of potentially better demand. The financial sector has climbed roughly 8% since Monday. The United States Oil Fund (USO) ramped up 1.59% Wednesday amid the news. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) is also gaining slightly amid the moves.

“The leadership rotation away from technology and Fangs toward broader market plays including small caps, cyclical sectors and international stocks strengthened for a second consecutive day,” Jim Paulsen, Chief Investment Strategist at the Leuthold Group, told CNBC.

“Since the vaccine announcement before yesterday’s open, investors have been selling ‘stay at home stocks,’ mostly technology and communications, and buying ‘economy re-opening stocks.’ The continuation of this trend [Tuesday] has only convinced more investors this new trend may persist,” he added.

Coronavirus cases continue to mount however, with the seven-day average of daily new cases Monday hitting 108,964, a 37% increase from a week ago, according to a CNBC analysis of data from Johns Hopkins University.

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