By Sam Goldfarb
A big rebound in technology shares helped lift major stock indexes, restoring some calm to markets after a rough end to the previous week.
Powered in large part by Nvidia and other chip makers, the S&P 500 rose 1.1% to snap a three-day losing streak. The tech-heavy Nasdaq Composite gained 1.6% after dropping 4.2% over the previous three trading sessions. The Dow Jones Industrial Average added 0.3%, or roughly 128 points.
Monday's gains followed President Biden's announcement on Sunday that he was ending his presidential run, a move that injected fresh uncertainty into an election that could have wide ranging implications for markets and the economy.
However, there was little consensus among investors and analysts about what Biden's announcement should mean for markets in the short run, and Monday's moves appeared to be influenced by other factors.
Among those: the recent declines in stocks that started out largely concentrated in the tech sector but that broadened out by the end of last week.
Data released July 11 showing a slowdown in inflation sparked a huge rotation out of large technology shares and into the stocks of small and midsize companies. Those had previously lagged behind larger stocks and are seen as bigger beneficiaries if the Federal Reserve cuts interest rates in the coming months.
But they, too, had fallen in recent days, setting the stage for Monday's rebound, which spanned the shares of both big and small companies.
Among individual movers, Nvidia gained 4.8% after Reuters reported the chip maker is working on a version of its AI chips that would be compatible with U.S. controls on exports to China. Verizon fell 6.1% after the wireless carrier reported weaker-than-expected quarterly revenue.
Evidence of the muted impact of the presidential campaign could be seen in the bond market.
In previous weeks, yields on longer-term U.S. Treasurys climbed when it looked more likely that Republicans could win control of both Congress and the White House -- increasing the chances that they could pass tax cuts that might expand the budget deficit and add to inflation pressures.
On Monday, longer-term Treasury yields initially edged lower -- possibly reflecting worse odds of a Republican sweep -- but they reversed that move before lunchtime.
By the end of the session, the yield on the benchmark 10-year U.S. Treasury note settled at 4.259%, up from 4.238% Friday.
Some investors believe recent market moves have less to do with politics, the Fed or even inflation and more to do with what they see as sky-high stock valuations.
"The thing that really worries us is the level of valuations," said Roger Aliaga-Diaz, global head of portfolio construction and chief Americas economist at Vanguard.
Such conditions, he added, leave stocks ripe for a correction even if it is hard to know when that could happen.
Some investors said coming earnings results for large technology companies could go far toward determining whether stocks can extend their momentum from Monday.
Both Google parent Alphabet and Tesla will report their latest results after the market closes Tuesday.
Write to Sam Goldfarb at sam.goldfarb@wsj.com
(END) Dow Jones Newswires
July 22, 2024 16:13 ET (20:13 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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