The Nasdaq and S&P 500 hit all-time highs on Monday, fueled by tech stocks as bond yields remained low, while investors awaited data on the U.S. labour market due on Friday.
But the TSX lost ground for the day, under pressure from a pullback in the energy sector and crude oil prices. The S&P/TSX Composite Index fell 85.01 points, or 0.42%, to 20,145.25 as the energy sector lost 3.1%. The materials sector was also weak, losing 1%. Similar to the U.S., the tech sector was a bright spot, gaining 1.5%.
Big tech companies including Facebook Inc, Apple Inc , Amazon.com Inc and Nvidia Corp were among the biggest boosts to the S&P 500 and the Nasdaq.
Facebook gained over 4% as a U.S. judge granted the company’s motion to dismiss a Federal Trade Commission lawsuit. The social media giant touched US$1 trillion in market cap on Monday.
In contrast, cyclical sectors dropped sharply amid fears over a spike in COVID-19 cases across Asia. Financials, energy and airlines fell sharply. Technology led the biggest sectoral gains on S&P.
“It’s end of the quarter and investors may want to take some profits and rotate out of energy and stick with tech, which has been the winner,” said Sam Stovall, chief investment strategist at CFRA Research in New York.
Stovall expects stocks should continue their near-term climb as investors await the new earnings season, in which year-over-year earnings growth of S&P 500 companies is expected to top 60%.
The S&P 500 on Friday logged its best weekly performance in 20 weeks, following a bipartisan agreement on a $1.2 trillion U.S. infrastructure spending deal and waning concerns about a sooner-than-expected policy tightening from the Federal Reserve.
Both the S&P 500 and the Nasdaq hit a series of record highs last week. the tech-heavy Nasdaq’s 5% gain in June is outpacing its peers as investors pile back into tech-oriented growth stocks on diminishing worries about runaway inflation.
Unofficially, the Dow Jones Industrial Average fell 151.56 points, or 0.44%, to 34,282.28, the S&P 500 gained 9.88 points, or 0.23%, to 4,290.58 and the Nasdaq Composite added 140.12 points, or 0.98%, to 14,500.51.
“We believe with the Fed putting a realistic goal post, investors now have much more of a risk on mentality going into the second half of the year. A lot of these tech names have underperformed, while fundamentals were very robust going into the June quarter,” said Wedbush Securities analyst Daniel Ives.
With the S&P 500 up almost 14% as the first half of 2021 draws to a close, activity in some areas of the market indicates concern over potential volatility, with some investors suggesting the market may be overdue for a significant pullback.
On the economic front, investor attention will be focused on consumer confidence data, a private jobs report and a crucial monthly employment report due later this week. Quarterly results from Micron Technology Inc and Walgreens Boots Alliance are also slated for this week.
Oil prices fell 2% to a one-week low on Monday after hitting their highest since 2018 earlier in the session, as a spike in COVID-19 cases in Asia and Europe put a brake on the rally before this week’s OPEC+ meeting.
Brent futures fell $1.50, or 2.0%, to settle at $74.68 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.14, or 1.5%, to settle at $72.91.
Those declines pushed both contracts out of overbought territory and were their lowest closes since June 18. Earlier in the volatile session, both benchmarks rose to their highest levels since October 2018.
“The forecast for oil demand recovery over the summer may be a bit overestimated, and traders are facing a reality check this week as the (COVID-19) Delta variant reached Europe and as an infections surge in Southeast Asia and Australia is bringing back lockdowns,” said Louise Dickson, oil markets analyst at Rystad Energy.
Indonesia is battling record-high cases, Malaysia is set to extend a lockdown and Thailand has announced new restrictions.
Australia also reported on Sunday one of the highest numbers of locally acquired coronavirus cases this year, triggering lockdowns in some cities.
All eyes this week will be on the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, to see what happens at their meeting on Thursday.
OPEC+ has increased supply by 2.1 million barrels per day (bpd) of oil from May to July after cutting supplies during the pandemic, and could decide to add more barrels in August after crude prices last week rose for a fifth week in a row.
OPEC’s forecasts point to an oil supply deficit in August and the rest of 2021 as economies recover from the pandemic, suggesting OPEC+ has room to raise output.
U.S. Treasury yields fell on Monday as the market prepared for the release of June employment data later in the week to gauge the strength of the economic recovery from the coronavirus pandemic.
The benchmark 10-year yield was last down 5.4 basis points at 1.4816%. Last week, it notched its largest weekly gain since March, but has remained below 1.6% since early June.
Canadian bond yields were also lower, with the 5-year issue trading just below 1%.
The August gold contract was up US$2.90 at US$1,780.70 an ounce and the September copper contract was down 1.1 cents at nearly US$4.28 a pound.
Reuters, Globe staff
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