29 September 2020

U.S. Stocks Finish Higher as Tech Shares Extend Rally

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U.S. stocks rose Tuesday as shares of big technology stocks recouped some of their recent losses.

Investors have so far this month endured volatile trading sessions as the previously highflying tech stocks suddenly pulled back. But such shares appear to have stabilized in recent days.

“We’re back to the place we were right before Labor Day weekend,” said Ernesto Ramos, head of equities at BMO Global Asset Management. “The market action is very, very much led by tech stocks, and growth stocks in general.”

The S&P 500 added 17.66 points, or 0.5%, to 3401.20. The tech-heavy Nasdaq Composite climbed 133.67 points, or 1.2%, to 11190.32. The Dow Jones Industrial Average inched up 2.27 points, or less than 0.1%, to 27995.60.

The advance by tech shares extended a rally that started late last week and boosted the broad stock indexes. Salesforce.com shares rose $5.04, or 2%, to $251.68, and Microsoft added $3.37, or 1.6%, to $208.78.

Looking ahead, investors face uncertainty about the spread of the coronavirus, efforts to produce a vaccine, the pace of economic recovery and the outcome of the coming U.S. elections. But some investors believe stocks still have room to rise.

“Right now, it looks to us like the economy’s going to be improving. They’re keeping interest rates low. And so it’s still a favorable environment for stocks, especially growth companies,” said Tom Plumb, president and portfolio manager at Plumb Funds.

A wave of multibillion-dollar deals emerging earlier this week from well-known tech companies have helped boost stock benchmarks, underscoring the outsize role of giant firms in U.S. equity markets. Nvidia shares rose $4.75, or 0.9%, to $519.64 Tuesday following news in recent days that the chip maker would acquire chip-designer Arm Holdings from SoftBank.

“There’s been exuberance in the tech sector and valuations are high, but M&A means some people think there’s still some assets that aren’t overvalued, they may actually be undervalued,” said Ludovic Subran, chief economist at Allianz. “M&A can be perceived as a sign of undervaluation” and some people will be buying.

Among other individual stocks, shares of NextEra Energy rose $13.78, or 4.9%, to $295.70 after the utility raised its outlook for next year and announced a stock split. Tesla shares jumped $30.14, or 7.2%, to $449.76, continuing to recover losses from earlier in the month.

Data Tuesday showed U.S. industrial production rose in August but at a lower rate than earlier in the summer, indicating the recovery in manufacturing is slowing.

Earlier Tuesday, key economic statistics showed that China’s economic recovery accelerated in August. Retail sales in the Asian nation returned to pre-coronavirus levels with their first month of growth this year. Other major indicators, including factory production, investment and property activity, all gathered pace, signaling a strong rebound for the world’s second-largest economy.

“It paints a fairly robust picture of the Chinese economy,” said Sebastien Galy, a macro strategist at Nordea Asset Management. “It’s a solid positive surprise, but the data tells you more about the message the Chinese government wants to give you.”

Overseas, the Shanghai Composite Index closed up 0.5%, and Hong Kong’s Hang Seng Index rose 0.4%. The pan-continental Stoxx Europe 600 rose 0.7% from an anticipated boost in Chinese demand for European goods.

The yield on 10-year U.S. Treasury bonds ticked up to 0.678%, from 0.669% on Monday.  

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, and Karen Langley at karen.langley@wsj.com.

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