ASX set for gains on the back of Wall Street’s bright start to May

By Shreyashi Sanyal and Krystal Hu

The S&P 500 and the Dow indexes rose on Monday (US time) amid a largely upbeat earnings season, while the Nasdaq came under pressure from declines in some high-flying growth stocks, as the rotation into cyclical and “reopening” stocks continued.

Economy-sensitive cyclical S&P 500 sectors such as consumer staples, energy, industrials and materials outperformed sectors housing growth stocks, including technology and communication services, by early afternoon.

Th Dow and S&P 500 are solidly higher in late trade.
Th Dow and S&P 500 are solidly higher in late trade.Credit:AP

In late trade, the Dow Jones Industrial Average is 0.8 per cent higher, the S&P 500 has gained 0.5 per cent and the Nasdaq Composite has dropped 0.3 per cent.

“We’ve seen a slight change in the pace of value stocks outperforming growth stocks year-to-date,” said Rod von Lipsey, managing director at UBS Private Wealth Management. “We still continue to believe that value will be a source of outperformance during increased mobility and recovery.”

The Nasdaq index fell as megacap technology stocks, including Amazon.com Inc, Alphabet Inc, Facebook and Microsoft, traded lower despite largely upbeat results.

The stocks have struggled to maintain the upward trajectory coming into reporting season. Chipmakers also fell, with the Philadelphia SE Semiconductor index down 1.5 per cent.

With more than half of S&P 500 companies having reported so far, profits are now seen rising 46 per cent in the first quarter, compared with forecasts of 24 per cent growth at the start of April, according to IBES data from Refinitiv. About 87 per cent of the companies have come also reported earnings per share ahead of analysts’ estimates.

“This is now the fourth straight quarter of earnings just absolutely crushing estimates,” said Ross Mayfield, investment strategy analyst at Baird. “I think there just continues to be an underestimation of how strong this rally and how strong the economy is rebounding.”

Strong earnings, improving economic data, fiscal stimulus and the Federal Reserve’s ultra accommodative stance have supported markets, pushing the S&P 500 and the Nasdaq indexes to record levels last week.

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Data on Monday showed US manufacturing activity grew at a slower pace in April, likely constrained by shortages of inputs amid pent-up demand due to rising vaccinations and massive fiscal stimulus.

The Labor Department’s non-farm payrolls data, slated to be released on Friday, is expected to show a rise in job additions in April.

The largest percentage gainer on the S&P 500 was Gap, which rose 9.1 per cent, while the largest decliner was Estee Lauder, down 6.9 per cent after the cosmetics maker missed analysts’ estimates for third-quarter sales.

On the Nasdaq 100 the largest gainer was Moderna, which rose 4.3 per cent after the drugmaker said it will supply 34 million doses of its COVID-19 vaccine this year to the global COVAX program.

Tesla fell 3.6 per cent. Industry sources told Reuters the electric-vehicle maker, under scrutiny in China over safety and customer service complaints, is boosting its engagement with mainland regulators and beefing up its government relations team.

The S&P index recorded 82 new 52-week highs and no new low, while the Nasdaq recorded 104 new highs and 39 new lows.

Reuters

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Source: Thanks smh.com