U.S. Stocks: Defensives, tech stocks push Wall Street higher as taper fears persist

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Updated: August 19, 2021 10:30 PM

With the S&P 500 up nearly 100% from its pandemic-lows hit in March 2020, investors have also said stocks might be due for some profit-taking. But a strong second-quarter earnings season is likely to keep losses limited.

U.S. Stocks: Wall Street drops as taper fears, commodity losses weighTravel-related stocks including cruise liners and airlines fell on fears the spread of the Delta variant of coronavirus could spark more travel restrictions. (AP Photo/File)

Wall Street indexes were supported by gains in defensive and heavyweight technology stocks on Thursday, as investors fretted over when the Federal Reserve could begin tapering its massive stimulus program.

The Dow Jones retreated on losses in growth-sensitive sectors, while gains in major technology stocks kept the Nasdaq in positive territory.

Defensive sectors such as utilities and consumer staples were the best performers, while technology rose 1.1%.The S&P energy sector was the worst performer among its peers with a 2.8% tumble, as oil prices hit a three-month low, while the materials sector dropped 0.7% after copper prices tumbled.

Data from the Labor Department on Thursday showed weekly unemployment claims at a 17-month low, further supporting the view that a job market recovery was underway.

The reading came a day after minutes from the Fed’s July meeting showed officials felt the employment benchmark for decreasing support to the economy “could be reached this year”, sending the S&P 500 down 1% in its worst day in a month.”

The Federal Reserve should start taking away the punchbowl by tapering after the next strong jobs report, potentially as soon as early September,” said Richard Saperstein, chief investment officer, Treasury Partners.

“After some initial stock market volatility, the market will likely appreciate the Fed’s tapering as it reinforces the central bank’s confidence in economic growth.”

At 11:56 am ET, the Dow Jones Industrial Average fell 12 points, or 0.03% , to 34,950.73, the S&P 500 gained 15.67 points, or 0.36 %, to 4,415.94 and the Nasdaq Composite gained 69.96 points, or 0.48%, to 14,595.87.

Concerns about the sudden tapering at a time when macroeconomic data was signaling a slowdown in U.S. economic growth have knocked Wall Street’s main indexes off record highs this week.

With the S&P 500 up nearly 100% from its pandemic-lows hit in March 2020, investors have also said stocks might be due for some profit-taking. But a strong second-quarter earnings season is likely to keep losses limited.

“There are other things that will probably cushion the market from any severe pullbacks. A lot of companies have raised their dividends, buybacks are back… whatever decline we’re headed for over the next few days, it’ll probably not be exaggerated,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

Investors are now awaiting the Fed’s annual research conference in Jackson Hole, Wyoming, next week for any cues on the central bank’s next steps.

Macy’s Inc and Kohl’s Corp rose 17.7% and 6.6%, respectively, after they raised their annual outlook as increasing vaccination rates brought more U.S. shoppers back to their stores.

Shares of Robinhood Markets Inc tumbled 7.4% after the owner of the popular trading app warned a trading frenzy among small-time investors that boosted its second-quarter revenue would slow down in the coming months.

Declining issues outnumbered advancers by a 2.8-to-1 ratio on the NYSE, and by a 2.2-to-1 ratio on the Nasdaq.

The S&P 500 posted 21 new 52-week highs and three new lows while the Nasdaq recorded 30 new highs and 212 new lows.

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