The S&P 500 logged its highest one-day gain in percentage terms since Mar 11 on Tuesday. Technology and financial stocks propelled the S&P 500 higher as all 10 of the index’s sectors ended the day in the green. A strong comeback for sectors which have suffered losses through most of the year was the most notable event of the day.
Rising fuel prices, strong economic data and a change in the manner in which investors perceive a possible rate hike seem to be fuelling these gains. This implies that concerns that were weighing on investors for quite some time now have dissipated. Â Picking technology and financial stocks from the S&P 500 looks like a prudent move at this time. Â Â Â
Rate Hike Fears Fall, Financials Set to Gain
Markets were gripped with fear following the release of Federal Open Market Committee’s (FOMC) minutes on May 18. But last Friday, a change in perception among investors was clearly perceptible as benchmarks ended higher despite speculations that a Fed rate hike in June was most likely. This is because a data dependent Fed has shown keenness in making such a move due to encouraging economic data, something which investors have begun to latch on.
Tuesday marked the release of record new home sales data, which increased by 1.6% from March to 619,000 in April, settling at its highest level since Jan 2008. This report came on the heels of a number of positive economic indicators. This led investors to react positively with tech and financial stocks leading the markets to close in the green.
Financials are a sector which will immediately benefit from a rate hike. The Financial Select Sector SPDR (XLF) and the Financial Services Select Sector SPDR (XLFS) have lost 1.2% and 2.5% year to date, respectively. But, on Tuesday, XLFS and XLF increased 1.7% and 1.5%, respectively. Over the last five days the XLF and XLFS have gained 2.9% and 3.4%, respectively.
Tech Stocks Stage Strong Rebound
Meanwhile, the Technology Select Sector SPDR (XLK) increased 1.9% and was the biggest advancer among the S&P 500 sectors during Tuesday’s session. XLK has gained 1.6% up to now in May after a spate of poor earnings numbers from big tech names dragged down the sector last month. Under par results from Alphabet Inc. (GOOGL - Analyst Report) , Microsoft Corporation (MSFT - Analyst Report) and Apple Inc. (AAPL - Analyst Report) were among the major disappointments last month on the tech stock front.Â