Tech stock rally turns Nasdaq positive for the year

Tech stocks helped lead Wall Street higher on Thursday and sent the Nasdaq into positive territory for the year, even as sliding US Treasury yields indicated the depth of concern about the economy.

The Nasdaq Composite index closed up 1.4 per cent, a shade above its level at New Year and underlining how the resilience of the technology sector in particular has helped equity markets claw back a lot of their coronavirus-related losses.

The S&P 500 rose 1.2 per cent, with its communication services sector — which includes Facebook and Google’s parent company, Alphabet — up 2 per cent.

The advances came as investors tracked the lifting of lockdowns that have paralysed economic activity across the globe.

“The strongest economies are starting to emerge from lockdown and that’s a big positive,” said Fabiana Fedeli, global head of fundamental equities at Robeco, adding that investors have started scouring the market for “laggards which are slightly wounded but not mortally wounded”.

Equity investors took another set of hefty US jobless claims in their stride, focusing on the slowing trend of furloughs and lay-offs. A total of 3.2m Americans filed for unemployment benefits last week, down from 3.9m a week earlier, bringing the tally for the past seven weeks to more than 33m.

The Treasury market signalled that the economic damage will necessitate very low interest rates for a long time. The two-year yield hit a record low of 0.129 per cent, down 0.05 percentage points, and the five-year note hit 0.293, also a record low, down 0.08 percentage points.

The yield on the benchmark 10-year Treasury note fell 0.09 percentage points to 0.63 per cent.

Oil prices reversed gains to settle lower. West Texas Intermediate, the US marker, was down 1.8 per cent at $23.55 a barrel, while global benchmark Brent crude fell 0.9 per cent to $29.46 a barrel.

“Given the severity of the current market situation and significant production curtailments announced already since April, shale producers are not relying on natural decline but are rather choosing more drastic methods to reduce their output substantially and fast,” said Veronika Akulinitseva, vice-president of North American shale and upstream at Rystad Energy.

In Europe, the region-wide Stoxx Europe 600 equity benchmark rose 1.1 per cent while Frankfurt’s Xetra Dax gained 1.4 per cent.

London’s FTSE 100 climbed 1.4 per cent after the Bank of England announced its decision to hold interest rates steady. The pound reversed a decline against the dollar to be up 0.1 per cent during the US session.

The Turkish lira weakened, hitting an all-time low after Ankara announced a crackdown on “manipulation” by foreign banks based in London.

Earlier on Thursday, Chinese trade data showed a surprise uptick in exports, which rose 3.5 per cent in April compared with the same month a year ago. Economists had expected a fall of almost 16 per cent.

A private survey of Chinese business activity, however, underscored weakness in the country’s economy as its services sector contracted for a third consecutive month in April because of the pandemic.

The Caixin-Markit services purchasing managers’ index also showed the second-sharpest fall in export orders and the fastest rate of job shedding on record for China’s services industry.

Some analysts pointed out that the extent of the Chinese economy’s recovery from the pandemic was still unclear.

Zhong Zhengsheng, chief economist at CEBM Group, said the “second shockwave for China’s economy brought about by shrinking overseas demand should not be underestimated in the second quarter”.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks closed down 0.3 per cent. Hong Kong’s Hang Seng slipped 0.7 per cent, while Japan’s Topix benchmark fell 0.3 per cent and Australia’s S&P/ASX 200 dipped 0.4 per cent.

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