NEW YORK: A rise in Apple shares and easing Treasury yields bolstered the tech-heavy Nasdaq index on Monday as focus shifted to Federal Reserve Chair Jerome Powell’s testimony and jobs data this week for fresh cues on the trajectory of interest rates.
Shares of the iPhone maker climbed 3.2% as Goldman Sachs initiated coverage with a “buy” rating.
Other rate-sensitive megacap stocks including Microsoft Corp and Meta Platforms were also among the top boosts to the S&P 500 and the Nasdaq as the yield on US 10-year Treasury notes was flat.
The 10-year yield reached a four-month high of 4.091% last week, while the two-year yield reached 4.944%, its highest level in over 15 years before pulling back on Friday.
Rising bond yields tend to weigh on equity valuations, particularly those of growth and technology stocks, as higher rates reduce the value of future cash flows.
The three main US stock indexes rallied on Friday and notched weekly gains as yields pulled back from their peaks after comments from Fed policymakers calmed jitters around aggressive rate hikes.
Powell will testify before Congress on Tuesday and Wednesday and investors will watch for clues on the policy outlook, after recent strong economic data and hot inflation numbers fueled bets that the central bank could raise interest rates to a higher-than-expected level.
“If the past is any prologue, he’ll continue to be firm on the hawkish talk because he has to keep the long term inflation expectations pinned,” said Thomas Hayes, chairman at Great Hill Capital LLC.
Traders expect at least three more 25-basis-point hikes this year and see interest rates peaking at 5.44% by September from 4.67% now.
US stocks have turned quite volatile in recent weeks after a strong performance at the start of this year as investors factor in the possibility of rates remaining higher for longer. The benchmark S&P 500 is up 6.2% so far this year after a 19.4% plunge in 2022.
At 12:00 p.m. ET, the Dow Jones Industrial Average was up 131.49 points, or 0.39%, at 33,522.46, the S&P 500 was up 27.32 points, or 0.68%, at 4,072.96, and the Nasdaq Composite was up 116.37 points, or 1.00%, at 11,805.11.
Nine of 11 major S&P 500 sectors advanced in early trading. However, commodity-linked shares of mining and oil companies fell 1.0% and 0.2%, respectively, after top crude and metals consumer China set a lower-than-expected target for economic growth this year at around 5%.
US-listed shares of Chinese companies Baidu Inc and PDD Holdings fell more than 1% each.
Shares of cryptocurrency-related companies fell after Silvergate Capital Corp pulled the plug on its crypto payments network, after raising doubts about the company’s ability to stay in business. The California-based bank slid 6.1%, while peer Signature Bank declined 1.0%.
Data showed new orders for US-manufactured goods fell less than expected in January, as higher orders for machinery and a range of other products pointed to manufacturing regaining its footing, although civilian aircraft bookings fell.
Advancing issues outnumbered decliners by a 1.00-to-1 ratio on the NYSE. Declining issues outnumbered advancers for a 1.28-to-1 ratio on the Nasdaq.
The S&P index recorded 19 new 52-week highs and one new low, while the Nasdaq recorded 69 new highs and 45 new lows.
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