The S&P 500 and Nasdaq traded sideways on Friday in a tight range, with investors buying energy, financial and materials shares and selling big tech stocks as they wait for progress on new fiscal aid from Washington to spur the market to new highs.
The S&P energy sector, financials and materials all rose on expectations they will benefit from a reopened economy.
Heavyweights Apple Inc, Tesla Inc and Microsoft Corp, each down, held the major indexes back as they headed for second straight week of gains.
Value and cyclicals outperform in a rising interest rate, higher-growth environment, which the U.S. economy is on the cusp of entering, said Thomas Hayes, chairman and managing member of hedge fund Great Hill Capital LLC in New York.
“We’re under-estimating the lag effect of all the money in the system as more and more vaccinations are delivered and as more of the country reopens” from business shutdowns, he said.
“We are continuing this rotation that would be consistent with the new business cycle, and as (bond) yields go up, value and cyclicals will lead,” Hayes said.
A sharp drop in new COVID-19 cases and hospitalizations in recent weeks have helped drive markets to new highs, though a near-term pullback could occur from the new coronavirus variants and potential snags in vaccine distributions.
The latest data showed U.S. consumer sentiment unexpectedly fell in early February as households remained worried about the economy despite expectations for additional fiscal stimulus.
A Reuters poll showed the U.S. economy is expected to reach pre-COVID-19 levels within a year as the proposed $1.9 trillion fiscal bill helps boost economic activity, but it’s likely to take more than a year for employment to fully recover.
U.S. President Joe Biden turned to a bipartisan group of local officials for support on his $1.9 trillion coronavirus relief plan to help millions of unemployed workers and for schools to reopen.
The Lipper data late on Thursday showed U.S.-based stock funds attracted $22.9 billion in the week to Wednesday, the largest weekly inflow since March 2008.
U.S. stock markets will be closed on Monday on account of the U.S. Presidents Day holiday.
By 2:15 p.m. ET, the Dow Jones Industrial Average fell 62.79 points, or 0.2%, to 31,367.91, the S&P 500 lost 0.79 points, or 0.02%, to 3,915.59 and the Nasdaq Composite added 0.82 points, or 0.01%, to 14,026.59.
The small-cap index was set to rise for the fifth week out of six full weeks this year. PayPal Holdings Inc rose about 4.2% as several brokerages raised price targets on the stock a day after the payments company’s investor day call. Walt Disney Co reported a surprise quarterly profit. However, its shares fell 1.8% from a record high after a more than 13% run up to its results over the last two weeks. Dating app operator Bumble Inc gained 14%, a day after a stellar debut sent its shares up more than 75%. Cannabis company Aphria Inc gained 7% after nearly halving in value in the prior session.
Advancing issues outnumbered declining ones on the NYSE by a 1.07-to-1 ratio; on Nasdaq, a 1.06-to-1 ratio favored advancers.
The S&P 500 posted 48 new 52-week highs and no new lows; the Nasdaq Composite recorded 233 new highs and 13 new lows.