Dow Jones smashes all-time highs on recovery hopes

Blue-chip barometer Dow Jones Industrial Average hit multiple intraday highs amid a faster-than-expected reopening of the US economy and growing inflation worries.

  • Dow Jones Industrial Average (DJIA) climbs 0.9% to hit new all-time high on Friday
  • The index’s biggest losers included Apple, Salesforce, Nike, and Visa
  • Investors continued rotating into value shares and selling off tech plays
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Which stocks led the Dow higher?

The benchmark Dow Jones Industrial Average jumped 0.9% or nearly 300 points on Friday (12 March 2021) to close at 32,778.64, setting another fresh record. About 348.3 million shares changed hands.

DJIA, which measures the performance of 30 blue-chip stocks listed in the US, advanced about 4.1% from Monday to Friday, marking its biggest weekly gain since November 2020.

Reuters noted that the widely watched stock market index was powering to notch an intraday record high every day of last week.

Aerospace giant Boeing Co saw its shares soaring 6.8% on the day to close Friday at US$269.19 per share, delivering the biggest boost to Dow Jones. Other stocks driving major gains on the index included Caterpillar Inc, JPMorgan Chase & Co, Goldman Sachs Group, and Walgreens Boots Alliance.

On the other hand, the biggest loser on the benchmark gauge last Friday was Salesforce.Com Inc, which slid 1.8% day-on-day to US$212.21. Other stocks that dragged on the index included Nike Inc with a 0.6% decline and Visa Inc with a 0.8% drop.

Rotation into value shares continues

Investors are piling into cyclical and underpriced value stocks that could potentially benefit from a recovery of the US economy, Reuters reported.

However, while Dow Jones enjoyed advances, the tech-heavy Nasdaq tumbled. This came as high-growth technology companies started to lose favour with investors, as inflation fears were revived by rising bond yields.

With the new US$1.9 trillion stimulus package, the US economy could expand 7-9% in 2021 and pressure interest rates higher, said hedge fund Great Hill Capital LLC’s chairman Thomas Hayes.

‘That’s why you’re seeing rates rise today because the reopening is happening faster and stronger than anticipated. And that’s when value and cyclicals and economically sensitive stocks outperform,’ Hayes said on Friday.

The high-flying but yield-sensitive group of stocks - including Facebook Inc, Tesla Inc, as well as Dow Jones constituents Apple Inc and Microsoft Corp - are perceived as the most vulnerable to rising borrowing rates.

Apple shares dropped 0.8% to finish at US$121.03 on Friday, while Microsoft’s share price lost 0.6% to end at US$235.75.

Investors are ‘a little nervous about current yield levels, which is affecting tech stocks’, said Crossmark Global Investments chief market strategist Victoria Fernandez.

Nordea Investment Funds strategist Sebastien Galy noted that growth stocks maintained a high sensitivity to interest rates, ‘which continues to suggest that they are quite overvalued’.

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