Mega Cap Technology Shares Boost Benchmark S&P 500; Spotlight on Lululemon
The major U.S. indexes are up on Wednesday as traders looked to recover from Tuesday’s weaker session, with traders betting the worst is of the banking crisis is over.
At 13:39 GMT, the blue chip Dow Jones Industrial Average is trading 32624.17, up 229.92 or +0.71%. The benchmark S&P 500 Index is at 4011.52, up 40.05 or +1.01% and the tech-weighted NASDAQ Composite is trading 11872.34, up 156.26 or +1.33%.
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Sectors on the Move
The technology sector is putting in an impressive performance early Wednesday with gains led by mega-stocks Meta, Amazon, Netflix and Apple. All four are up over 1% shortly after the cash market opening.
Meanwhile, regional banks rose broadly, with the SPDR S&P Regional Banking ETF (KRE) advancing more than 1%. Big banks such as Citigroup and Goldman Sachs also advanced.
Stocks Making Headlines Early in the Session
Lululemon shares are up nearly 17% after posting a strong holiday quarter and sharing upbeat guidance for the current fiscal year.
Major apparel and home goods retailers – Urban Outfitters, Burlington, Foot Locker, Ross Stores – were all negative in the early go on Wednesday morning after UBS downgraded the group to sell form neutral, saying it sees at least 23% downside to its price targets for each of the companies as a slowdown in consumer spending curbs the industry’s earnings prospects, according to CNBC.
CNBC is also reporting that shares of payroll services company Paychex, Inc were up nearly 3% ahead of fiscal third quarter earnings due after the close on Wednesday. Analysts expect revenue of $1.36 billion and earnings per share of $1.25, according to FactSet.
Short-Term Outlook
Investors are buying stocks but some remain cautiously optimistic that recent banking turmoil has settled. Furthermore, some are questioning whether the Fed will actually pause its rate hiking campaign in May if the banking issues disappear but inflation remains stubbornly high.
Gains could be limited if US Treasury yields rise in anticipation of the return of a more aggressive Federal Reserve, but we’re not likely to know anything about the inflation outlook until Friday’s PCE price data is released.
If the PCE shows inflation is still high then look for stock market gains to be capped, especially technology shares. However, weaker than expected PCE inflation data could green light another leg higher in the stock market.