Stocks, Bitcoin Rebound After Last Week's Turbulence

By Anna Hirtenstein and Alexander Osipovich

U.S. stocks advanced Monday, led by rebounding shares of technology and communications companies, as investors grew more comfortable with the inflation outlook and the pace of the economic recovery.

The tech-heavy Nasdaq Composite rose 1.5% in midday trading, adding to its recovery after it eked out a small gain last week and snapped a four-week losing streak.

The S&P 500 climbed 1.1%. The Dow Jones Industrial Average gained 199 points, or 0.6%.

Investors are keeping a close eye on inflation indicators to determine whether a recent rise in prices is temporary or part of a longer-term trend. Energy and materials companies that are able to pass along higher costs to consumers have been an increasingly popular trade, while tech companies' shares and bonds have lagged behind.

"Inflation concerns have lessened, there's more of a wider recognition that inflation will be transitory," said Fahad Kamal, chief investment officer at Kleinwort Hambros. "This is reflecting the fact that we hit the fastest part of the recovery. Growth, while continuing, is going to be at a decelerating pace."

Cryptocurrencies continued a dramatic stretch of trading. Bitcoin rebounded after suddenly dropping over the weekend to nearly $30,000 and was recently trading at $37,542. But the cryptocurrency is still down more than 40% from its mid-April peak.

"Decentralized finance is facing its first real challenge since inception. We don't think that this is the end; the bubble has not really popped yet," said Monica Defend, global head of research at Amundi. "Central banks are ready to play in the digital currency field, I expect with the central banks in play, there will be more regulation to come and more transparency."

Tech and communications were the strongest-performing sectors of the S&P 500 on Monday. Among the day's stronger gainers were Twitter, which was up 4.3%, and Tesla, which gained 3.3%. Google parent Alphabet, Facebook and Microsoft were all up more than 2%.

In corporate news, vaccine maker Moderna rose 2% after striking a deal with Samsung's biotech division to manufacture its Covid-19 vaccines in South Korea.

Virgin Galactic jumped 20% after the space-travel company said it completed its first human space flight on Saturday from New Mexico.

Earnings season is winding down. Quarterly earnings are due this week from chip maker Nvidia on Wednesday and tech companies Salesforce.com and Dell Technologies on Thursday.

Some investors remain on edge about inflation. The stock market's strong performance this year has been underpinned by easy-money policies from the Federal Reserve. Any shift by the central bank to a more inflation-fighting posture undermine the rally, investors say.

Philip Blancato, chief executive of Ladenburg Thalmann Asset Management, said he is concerned about a stock-market correction as soon as the Fed begins to dial back its bond purchases. Mr. Blancato has cut back his firm's holdings of tech stocks over the past three months, while adding to its holdings of financials, industrials and smaller-cap companies, as well as emerging-markets stocks.

"The reality is, there are serious pockets of inflation, and it's going to affect the consumer," Mr. Blancato said. "I think inflation will become a headwind that slows down people's spending."

Increases in raw-materials prices have been among the warning signs for those worried about inflation. In commodities, future on benchmark Brent crude oil rose 2.5% on Monday to $68.09 a barrel. Analysts at Goldman Sachs put out a note over the weekend with a forecast that it will reach $80 by summer.

In bond markets, the yield on the benchmark 10-year Treasury note declined to 1.601% from 1.629% Friday. Yields fall when prices rise.

Overseas, the pan-continental Stoxx Europe 600 ticked up 0.1%. In Asia, major benchmarks were mixed. The Shanghai Composite Index advanced 0.3% while Hong Kong's Hang Seng Index slipped 0.2%.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Alexander Osipovich at alexander.osipovich@dowjones.com


  (END) Dow Jones Newswires
  05-24-21 1220ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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