By Herbert Lash
NEW YORK (Reuters) – Stocks on Wall Street traded near breakeven on Friday as investors sold technology shares and rotated into economically sensitive cyclical stocks in anticipation the U.S. economy will boom on pent-up demand once the coronavirus pandemic is subdued.
Industrials led rising sectors in the S&P 500, spurred by a 10.2% surge in Deere (NYSE:DE) & Co and Caterpillar (NYSE:CAT)’s 5.3% gain to an all-time peak. Financials, materials and energy, along with industrials, rose more than 1%.
The S&P 1500 airlines index also soared 3.8%, with post-pandemic travel in focus.
Stay-at-home winners Microsoft Corp (NASDAQ:MSFT), Facebook Inc (NASDAQ:FB), Alphabet (NASDAQ:GOOGL)’s Google and Netflix Inc (NASDAQ:NFLX) fell between 0.4% and 2.3% in a trend seen for most of the week. Apple Inc (NASDAQ:AAPL) and Amazon.com Inc (NASDAQ:AMZN) also fell.
A battle continues between tech-led growth stocks and cyclicals, companies that are heavily affected by economic conditions, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“When the economy is roaring, they’re roaring. When the economy is weakening, they’re weakening,” Ghriskey said. “The economy will roar, at least for a period of time. There’s huge pent-up demand, whether just for travel or going back to work.”
By 2:33PM ET, the Dow Jones Industrial Average had risen 16.28 points, or 0.05%, to 31,509.62, the S&P 500 lost 6.4 points, or 0.16%, to 3,907.57 and the Nasdaq Composite added 1.02 points, or 0.01%, to 13,866.37.
Strong earnings, progress in vaccination rollouts and hopes of a $1.9 trillion federal coronavirus relief package helped U.S. stock indexes hit record highs at the start of the week.
The Dow hit a fresh intraday peak, led by Caterpillar, after Deere raised its 2021 earnings forecast. Deere reported profit more than doubled in the first quarter on rising demand for farm and construction machinery.
The benchmark S&P 500 and the tech-heavy Nasdaq headed toward their first weekly declines this month on concerns over higher stock market valuations, and expectations of rising inflation led to fears of a short-term pullback in equities.
Bank of America (NYSE:BAC) expects a more than 10% pullback in stocks, which are trading at more than 22 times 12-month forward earnings, the most expensive since the dot-com bubble of the late 1990s.
“What we saw (this week) represents a market that is tired and may not do very much. So we are headed for some sort of a pullback, but I don’t think we’re there just yet,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
Meanwhile, data showed IHS Markit’s flash U.S. composite PMI, which tracks the manufacturing and services sectors, inched up to 58.8 in February.
Applied Materials Inc (NASDAQ:AMAT) rose 5.6% and was among the top boosts to both the Nasdaq and the S&P 500 after it forecast second-quarter revenue above market expectations. Demand for its semiconductor manufacturing tools has picked up during a global shortage of semiconductors.
Advancing issues outnumbered declining ones on the NYSE by a 2.02-to-1 ratio; on Nasdaq, a 2.30-to-1 ratio favored advancers.
The S&P 500 posted 45 new 52-week highs and no new lows; the Nasdaq Composite recorded 198 new highs and seven new lows.