Stocks Rise, on Track for Quarterly Gains Despite Recent Selloff

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U.S. stocks rose Thursday, indicating the broader equity market would eke out gains for the third quarter despite recent whipsawed trading.

The S&P 500 rose 0.4%, on track to cement a sixth-consecutive quarter of gains. The Dow Jones Industrial Average gained about 65 points, or 0.2%. The technology-heavy Nasdaq Composite climbed 0.6%.

All three indexes are on track to record monthly losses.

Investors have had to navigate an uptick in Delta variant Covid-19 cases this quarter, alongside concerns that higher inflation—driven by surging energy prices—would stick around longer than expected. Also dogging markets were fears of contagion from debt-laden property developer China Evergrande Group. 

Stocks have endured a particularly rocky stretch since the Federal Reserve signaled last week that it would start to reduce its bond-buying as soon as November—and possibly begin to raise interest rates next year.

“We’ve entered a slightly more difficult, more wonky stage of the recovery, and there’s a number of headwinds emerging against the upward march we’ve seen since last year,” said Sebastian Mackay, a multiasset fund manager at Invesco. 

The expectation for interest rate increases and higher inflation—also reflected in rising oil and commodities prices—has led some investors to sell government bonds, whose yields have been near historically low levels. That trend continued Thursday, with the yield on the benchmark 10-year Treasury note ticking up to 1.543% from 1.540% Wednesday. Yields and prices move inversely.

“People realize that the only asset with real expected returns are equities. The market kind of seems to grind higher on this there-is-no-alternative environment,” said

Edward Park,

chief investment officer at U.K. investment firm Brooks Macdonald. “That won’t last if central banks make it clear they are raising rates regardless of the growth backdrop.” 

Investors have sold off shares of large technology companies.



Photo:

brendan mcdermid/Reuters

Investors have also recently sold off shares of large technology companies, which tend to do better in low-yielding environments because investors have more incentive to buy shares and await higher profits in the future. Portions of that trend, however, reversed Thursday.

Netflix

gained 2.7%, while

Advanced Micro Devices

jumped 3.1%.

Shares of

Virgin Galactic Holdings

gained 7.9% after the top U.S. aviation safety regulator said it had cleared the company to operate space flights again. Shares of ​​

Bed Bath & Beyond

sank 25% after the retailer lowered its guidance for the year as it reported slower traffic into its stores due to the Delta variant and supply-chain challenges.

Meanwhile, data out Thursday showed that the number of Americans who applied for first-time unemployment benefits in the week ended Sept. 25 edged up to 362,000, from 351,000 the week prior.

Futures for Brent crude, the benchmark in international energy markets, fell 1.5% to $76.95 a barrel.

Overseas, the pan-continental Stoxx Europe 600 edged up 0.1%.

Indexes in Asia closed with a mixed performance Thursday. China’s Shanghai Composite added 0.9%, and South Korea’s Kospi edged up 0.3%. Hong Kong’s Hang Seng declined 0.4%. Concerns over Chinese growth and the resilience of its property sector have also weighed on global sentiment this quarter. 

Caitlin McCabe contributed to this article.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com

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