Stocks trade mixed, Nasdaq sets fresh record high

Stocks were mostly higher on Wednesday, with the S&P 500 and Nasdaq hovering near record highs as concerns over tightening monetary policy at least temporarily faded. 

The Nasdaq Composite added to gains to set yet another record high as technology stocks continued a run of outperformance. Microsoft (MSFT) shares also set a fresh record intraday level on Wednesday, bringing its market capitalization to more than $2 trillion. 

Cryptocurrency prices stabilized after slumping earlier this week. Bitcoin (BTC-USD) traded back above $34,000, after falling below $30,000 for the first time since January during the regular trading day. Ethereum (ETH-USD), the second largest cryptocurrency by market capitalization, also reversed some losses and gained Wednesday morning, though it has still more than halved from its all-time high of over $4,300 earlier this year. 

The latest stretch of volatility in cryptocurrency prices has coincided with more stringent regulations of the digital assets overseas, and a shift in the U.S. Federal Reserve’s outlook that appeared to make the central bank more inclined to act to stave off inflation. This has undercut the appeal of cryptocurrencies as an inflation hedge for some investors, some strategists suggested. 

“Over the last week when we had the Fed announcement, I think a lot of risk assets and a lot of folks that took the Fed’s commentary, the dot plot specifically, as potentially [taking a] more hawkish view on what it could mean for their policy,” David Grider, Fundstrat Lead Digital Asset Strategist, told Yahoo Finance. “And I think some risk assets got hurt by that — crypto included.”

While other assets including equities have rebounded in the days since the Federal Reserve’s June decision and updated outlook, cryptocurrency prices have remained under pressure. That’s primarily been a function of the regulatory crackdown in China, Grider added, with the government reining in cryptocurrency transactions further and shutting down Bitcoin and Ethereum mining operations in some parts of the country.

“We do need some catalysts to emerge to take us higher. I mean, the currency thing with some of the Latin American countries, the adoption, that was one thing,” he added. “But I would say that the market tone is very bearish right now [on crypto].”

Stocks have found their footing in the days since the Fed’s latest monetary policy decision and post-meeting messaging, with many investors clinging to hopes the central bank may maintain accommodative policies longer than their latest forecasts suggest. Fed Chair Jerome Powell helped bolster this view in comments to the U.S. House Select Subcommittee on the Coronavirus Crisis on Tuesday, saying the economy still has “a long way to go” in recovering and affirming the central bank will do “everything we can to support the economy for as long as it takes.”

“The Fed meeting was a surprise but the reaction was not: financial conditions tightened and while there has been some stabilization recently, I think the markets rightly see the latest Fed move as a modest policy mistake,” Neil Dutta, head of economics and Renaissance Macro Research, wrote in a note Tuesday. “There is some reason to expect the Fed to signal steps to the exit on its asset purchase program, especially as labor market conditions gain steam this summer. However, the federal funds rate is a different matter. The good news is that this is a small mistake that can be undone later.”

1:20 p.m. ET: ‘They are going to go higher’: Q2 earnings could be another catalyst for Big Tech stocks, strategist says

So far this year, big tech stocks and other high-growth software names have underperformed the broader market, with investors turning instead toward cyclical areas that might benefit more directly from business reopenings and the economic recovery. But after half a year of underperformance, tech stocks may have room to run from here, at least one strategist argued. 

“It’s quite interesting, the rotation,” Luis Strohmeier, Octavia Wealth Partner and Wealth Advisor, told Yahoo Finance. “Last year, right after the election, value was kind of the name and growth stocks, specifically big tech, was a little bit forgotten.” 

“Then, all of a sudden, just about 30 days ago, we see some of the lows, some of the correction. Some cloud-based stocks were down about 30% and even the big names — Amazon, Apple, Google — they were down 10-14%,” he said. “It wasn’t surprising to us to see the appetite, and that sequential rotation, into high growth stocks again.”

Second-quarter earnings results coming out next month for many of these names could also serve as another catalyst, Strohmeier added. 

“I don’t there are going to be many surprises,” he said. “I think expectations will be met for most of these stocks in high growth areas. So I think they are going to go higher.” 

10:26 a.m. ET: Southwest shares fall after announcing CEO Gary Kelly will step down 

Shares of Southwest (LUV) were down about 1% on Wednesday after the airline said its CEO Gary Kelly will step down as CEO and become Executive Chairman beginning in 2022. He will serve in that role through at least 2026, the company added.

Robert Jordan, current executive vice president of corporate services, will become Kelly’s successor beginning February 1, 2022. 

“Gary has been an outstanding CEO for Southwest for nearly two decades and has developed an excellent group of Senior Leaders to shepherd the airline into its next 50 years,” William Cunningham, Southwest lead director of the board, said in a statement. “We are thrilled he is willing to continue to serve as the Board’s Executive Chairman, subject to the annual elections process. Bob inherits a solid strategy and great momentum to continue the airline’s recovery as the COVID pandemic wanes.” 

10:13 a.m. ET: New home sales unexpectedly fall for a back-to-back month 

New home sales unexpectedly fell for a second straight month in May, according to new data from the Commerce Department, in the latest sign of a slowdown in housing market activity. Tight inventory levels and rising prices weighed further on purchasing activity, and higher input prices have also been weighing on new homebuilding. 

New home sales were down 5.9% in May over April, compared to a rise of 0.2% expected. This brought new home sales down to a seasonally adjusted annualized rate of 769,000

This also came following a downwardly revised monthly drop of 7.8% in April, compared to the drop of 5.9% previously reported. 

9:45 a.m. ET: U.S. manufacturing sector activity hits a record level in June while service sector activity pulls back from all-time high 

U.S. manufacturing sector and services sector activity in the U.S. diverged in June, according to IHS Markit’s preliminary June purchasing managers’ index (PMI).

The U.S. manufacturing PMI rose to a record high of 62.6. That was up from 62.1 in May and beat estimates for 61.5, according to Bloomberg consensus data. Readings above the neutral level of 50.0 indicate expansion in a sector.

The services sector PMI, however, fell much more than expected to 64.8 from 70.4 in May, which had been an all-time high. Economists were looking for a reading of 70.0 for the month. 

According to IHS Markit, private sector businesses across both manufacturing and services industries were still reporting issues with higher prices and difficulties in finding staff. The rate of input price inflation softened slightly from May, but still marked the second-fastest on record, according to the institution. 

Manufacturers reported seeing increases in raw material and fuel costs, while service sector businesses highlighted higher wages to attract workers and greater transportation costs. 

“Although price gauges have also slipped from May’s all-time highs, it’s clear that the economy continues to run very hot,” Chris Williamson, chief business economist at IHS Markit said in a press statement. “Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers’ warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand.”

7:22 a.m. ET Wednesday: Stock futures struggle for direction

Here’s where markets were trading Wednesday morning: 

  • S&P 500 futures (ES=F): 4,235.50, -0.02 points (-0.75%)

  • Dow futures (YM=F): 33,846.00, +11 points (+0.03%)

  • Nasdaq futures (NQ=F): 14,264.75, +6.50 points (+0.05%)

  • Crude (CL=F): +$0.50 (+0.69%) to $73.35 a barrel

  • Gold (GC=F): +$5.40 (+0.3%) to $1,782.80 per ounce

  • 10-year Treasury (^TNX): -0.4 bps to yield 1.468%

6:14 p.m. ET Tuesday: Stock futures drift higher

Here’s where markets were trading Tuesday evening:

  • S&P 500 futures (ES=F): 4,236.50, +0.25 points (+0.01%)

  • Dow futures (YM=F): 33,853.00, +18 points (+0.05%)

  • Nasdaq futures (NQ=F): 14,266.25, +8 points (+0.06%)

Photo by: STRF/STAR MAX/IPx 2021 6/7/21 Atmosphere in and around Wall Street in New York City.

Photo by: STRF/STAR MAX/IPx 2021 6/7/21 Atmosphere in and around Wall Street in New York City.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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