Tech stocks fuel Wall Street rally as factory activity expands

NEW YORK (Reuters) – The S&P 500 and the Nasdaq hit new highs on Tuesday with technology leading the charge as Apple and Zoom Video soared and better-than-expected U.S. manufacturing sector data fueled optimism about the economic recovery.

In the previous session Wall Street’s three main indexes had recorded their fifth straight monthly gain and their strongest August advance in more than three decades, which was also partly thanks to help from technology stocks and central bank support.

On Tuesday heavyweight Apple Inc was up 4%, rising for the second straight day after its stock split took effect. A report also said the company had asked suppliers to make at least 75 million 5G iPhones for later this year.

Zoom Video Communications Inc surged 39% after the video-conferencing platform raised its annual revenue forecast by more than 30% as it converted more of its huge free user base to paid subscriptions.

“There’s a bit of support from the economic data as far as it improves sentiment for the market but I think today investors are looking at the good earnings we saw coming out of tech,” said Veronica Willis, investment strategy analyst at Wells Fargo Investment Institute in St. Louis.

ISM data showed U.S. factory activity expanded for the third straight month to a reading of 56.0 in August, the highest since November 2018. The figures follow encouraging manufacturing surveys from China and Europe earlier in the day.

However, employment continued to lag, according to ISM data, supporting views that the labor market recovery was losing momentum. Investors will keep a close eye on the monthly U.S. jobs report due on Friday.

At 2:09 p.m. EDT, the Dow Jones Industrial Average was up 110.1 points, or 0.39%, at 28,540.15, the S&P 500 gained 15.84 points, or 0.45%, to 3,516.15 and the Nasdaq Composite added 136.28 points, or 1.16%, to 11,911.74.

While the Nasdaq and the S&P 500 were scaling all-time highs, the blue-chip Dow was still about 3.5% below its February peak.

Technology, materials and consumer discretionary stocks led gains among the major S&P sectors.

Hopes that Senate Republicans will unveil a new coronavirus relief bill next week also helped boost sentiment.

But other strategists expect more market volatility as U.S. politics will take center stage in the coming weeks. Republican President Donald Trump, who is running for re-election against Democratic presidential nominee Joe Biden, has seen his polling gap with the former vice president narrow recently.

“There’s still a lot of uncertainty mostly around the pandemic but also some uncertainty around the election. The closer we get to that election the more volatility we’ll see in the market,” said Willis. Walmart rose 6% after the retailer unveiled the perks of its new loyalty program, Walmart Plus.

Tesla Inc fell 4% after the electric-car maker announced plans to raise up to $5 billion through a share sale program a day after its 5-for-1 stock split.

Advancing issues outnumbered declining ones on the NYSE by a 1.36-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored decliners.

The S&P 500 posted 33 new 52-week highs and 1 new low; the Nasdaq Composite recorded 98 new highs and 39 new lows.

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