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S&P 500 stays bulletproof another week as Nasdaq travails linger

Despite rate hike, attack on congressmen, political uncertainty, and a market-moving buyout by Amazon, the broader market remained largely unmoved

Image Credit: Bloomberg
Traders at the New York Stock Exchange. Gains in industrial, utility and real estate stocks were the market’s saving grace last week.
Gulf News

New York: Fears that a sell-off in technology stocks would spur a deeper rift in equities were assuaged as the S&P 500 Index ended the week little changed, despite continued weakness in some of market’s biggest winners.

The Nasdaq 100 fell 1.1 per cent, bringing its two-week drop to 3.4 per cent, the worst slide of that length since November. The culprit was the same handful of hot stocks — Apple, Netflix and Microsoft — that began a quick descent last Friday.

Yet in a week that included an interest rate hike by the Federal Reserve, an attack on congressional representatives in Washington, political uncertainty and a market-moving buyout of Whole Foods Market by Amazon, the broader market remained largely unmoved.

The benchmark gauge ended the week practically unchanged at 2,433. That marks the second week in which the S&P 500 has lagged behind its elder counterpart, as the Dow Jones Industrial Average climbed 0.5 per cent over the five days to end at 21,384, the fourth weekly advance.

Tech companies within the S&P 500 dropped 1.1 per cent, as semiconductors extended losses to a second week, losing 2.2 per cent on declines in Advanced Micro Devices, Lam Research Corp and Skyworks Solutions Inc.

The move in tech was once again extended to growth stocks in general, as the Russell 1000 Growth Index fell on three out of the five days. Value stocks climbed for a fourth straight week.

“Quant factors that were effective at selecting tech stocks in January-May generally have not worked in June,” Morgan Stanley strategists led by Brian Hayes, wrote in a note to clients. “We estimate for the US that one-third of the tech sector underperformance is related to growth versus value underperformance and two-thirds is sector specific.”

Outside tech, the biggest drag on the market came on Friday as Amazon’s announcement that it’s buying Whole Foods sent a slew of grocery store and consumer staples stocks plunging. While $12.5 billion of market value was added to Amazon in the hours following the deal, and $3 billion to Whole Foods, a net $39 billion was erased from the S&P 500 Consumer Staples Index.

Gains in industrial, utility and real estate stocks were the market’s saving grace in the week, as 10-year Treasury yields strengthened 5 basis points (bps) and investors looked to higher-yielding shares.