Tech Stocks Drive Major Indexes Higher as Nasdaq Rises 1.4%

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 190.18 points, or 1.4%, to 13661.17, 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 41.19 points, or 1%, to 4197.05. The Dow Jones Industrial Average gained 186.14 points, or 0.5% , to close at 34393.98.

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 trading at $39,205 late Monday afternoon. It got a boost when Tesla CEO Elon Musk -- one of the most influential figures in crypto markets -- tweeted that North American bitcoin miners had committed to publish data on their use of renewable energy, a step could alleviate concerns over bitcoin's impact on the environment. But bitcoin is still down nearly 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 best-performing sectors of the S&P 500 on Monday. Among the day's stronger gainers were Twitter, which rose $2.61, or 4.8%, to $57.06, and Tesla, which gained $25.56, or 4.4%, to close at $606.44. Google parent Alphabet, Facebook and Microsoft all gained more than 2%.

In corporate news, shares of Moderna rose $2.72, or 1.7%, to $164.17 after the vaccine maker struck a deal with Samsung's biotech division to manufacture its Covid-19 vaccines in South Korea.

Virgin Galactic shares jumped $5.82, or 28%, to $26.89 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 3% on Monday to settle at $68.46 a barrel. Analysts at Goldman Sachs put out a note over the weekend with a forecast that it will reach $80 by summer.

Futures on gold, a traditional hedge against inflation, ticked up 0.4% to $1884.60 a troy ounce, their highest settle since early January. The precious metal has climbed in seven of the past eight trading sessions.

In bond markets, the yield on the benchmark 10-year Treasury note fell to 1.608% 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 1654ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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