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Tech Stocks Power Markets Higher

10/12/2020 | 05:08pm EST

By Jem Bartholomew and Caitlin McCabe

U.S. stocks jumped sharply Monday, propelled higher by a surge in technology stocks that led major indexes to their highest closing values in nearly six weeks.

All three major U.S. indexes climbed for the fourth consecutive session. The S&P 500 rose 57.09 points, or 1.6% to 3534.22 -- its second-highest close in history. The Dow rallied 250.62 points, or 0.9%, to 28837.52.

Meanwhile, the Nasdaq Composite surged 296.32 points, or 2.6% to 11876.26, its third-highest close on record. All three indexes are closing in on their early September highs after a recent stretch of volatility.

Megacap companies including Apple and Amazon.com were among the strongest performers, jumping 6.4% and 4.8%, respectively. Apple is set on Tuesday to unveil a 5G-enabled iPhone, which some investors hope could fuel the kind of sizable growth that stemmed from previous technological advancements for the iPhone. Amazon also is kicking off its Prime Day event of shopping deals Tuesday.

The robust gains build on last week's rally, during which U.S. stocks jumped on signs that next month's presidential election could have more of a decisive result than originally expected. National polls have showed a growing lead for former Vice President Joe Biden over President Trump.

This week, election expectations are likely to remain a focus among traders, though many will also be parsing the beginning of third-quarter earnings season. Investors are betting that the results will show corporate performance has turned a corner. With the economy continuing to slowly reopen, profits of the large companies in the S&P 500 are now projected to record a drop of 20% from a year earlier, an improvement from the 25% decline anticipated at the end of June.

Other technology companies including Twitter and Facebook also jumped, with both rallying more than 4%.

"The last two weeks were about improving market [participation] ... but today it's a day focused on technology," said Keith Lerner, chief market strategist at Truist/SunTrust Advisory. "With so much uncertainty about fiscal stimulus out there, it's natural to see rotation back into the secular growth [stocks.]

"If you don't get stimulus, those companies' growth is likely to sustain, " Mr. Lerner continued.

Monday's gains were broad. The materials sector was the only one of the S&P 500's 11 industry groups to post a decline. JPMorgan Chase, Johnson & Johnson and Citigroup, all of which are expected to report earnings Tuesday, ended the day higher.

This week, investors will be looking for signs from companies that cost cuts, including layoffs, are behind them, and that business leaders are confident about the quarters ahead, said Jeffrey Kleintop, chief global investment strategist at Charles Schwab. He said traders also will be looking for any signs that "precautionary cash hoards may turn into dividends next year."

"It isn't so much about the numbers and the degree to which companies beat estimates," Mr. Kleintop said. "It's those words that matter more and the tone and confidence from business leaders."

In addition to earnings, traders also will be focused this week on any signs of progress on stimulus talks. The latest White House offer on a new coronavirus package hit resistance from both Democrats and Republicans during the weekend, diminishing hopes that an agreement would be struck before the presidential election on Nov. 3.

Still, investors are weighing the possibility that a Democratic sweep of the presidency and Congress next month could lay the ground for a large stimulus package to be passed, offering additional relief to households and businesses.

"There is a good chance that we've overplayed the volatility due to the November election," said Edmund Shing, global head of equity derivative strategy at BNP Paribas. The Federal Reserve is still "in 'whatever it takes' mode," and both major parties are committed to more stimulus, though a bipartisan deal is very unlikely, he said.

Overseas, shares also climbed. The Stoxx Europe 600 gained 0.7%. China's Shanghai Composite Index closed up 2.6% and Hong Kong's Hang Seng Index advanced 2.2%.

In commodities, Brent crude, the international oil benchmark, fell 2.6% to $41.72 a barrel.

The market for U.S. Treasurys was closed for Columbus Day.

--Joe Wallace contributed to this article.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

(END) Dow Jones Newswires

10-12-20 1707ET

Stocks mentioned in the article
ChangeLast1st jan.
APPLE INC. 0.19% 122.8826 Delayed Quote.62.17%
BNP PARIBAS 1.69% 44.95 Real-time Quote.-16.33%
CITIGROUP INC. 3.22% 57.27 Delayed Quote.-30.57%
DJ INDUSTRIAL 0.11% 29857.59 Delayed Quote.3.86%
FACEBOOK INC 0.51% 287.9899 Delayed Quote.39.61%
HANG SENG 0.07% 26542.09 Real-time Quote.-5.91%
JPMORGAN CHASE & CO. 1.81% 121.925 Delayed Quote.-15.44%
LONDON BRENT OIL 2.03% 48.2 Delayed Quote.-27.74%
NASDAQ 100 -0.03% 12450.352807 Delayed Quote.42.62%
NASDAQ COMP. -0.10% 12341.803505 Delayed Quote.35.96%
S&P 500 0.15% 3667.59 Delayed Quote.13.36%
S&P/CITIC 300 INDEX -0.01% 4392.56 Delayed Quote.23.68%
S&P/CITIC 50 INDEX 0.05% 4422.92 Delayed Quote.18.30%
STOXX EUROPE 600 -0.05% 391.69 Delayed Quote.-5.76%
STOXX EUROPE 600 NR -0.05% 862.69 Delayed Quote.-3.83%
THE CHARLES SCHWAB CORPORATION 1.44% 50.735 Delayed Quote.5.17%
WTI 2.47% 45.225 Delayed Quote.-26.33%
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