U.S. markets and stock exchange traded funds were mixed on Tuesday, with the technology sector dragging on equities.
On Tuesday, the Invesco S&P 500 Equal Weight ETF (RSP), which follows the S&P 500 Equal Weight Index (EWI), rose 0.7%. Meanwhile, the S&P 500 was down 0.3%, the Dow Jones Industrial Average was 0.5% higher, and the Nasdaq Composite fell 1.8%.
Economically sensitive companies in the energy, financials, and industrials sectors climbed while big tech names dragged on the S&P 500 and Nasdaq Composite.
Bolstering the more economically sensitive segments of the markets, updated data revealed U.S. factory activity expanded in December and showed signs that supply-chain problems could be improving, the Wall Street Journal reports.
Meanwhile, the COVID-19 Omicron variant continued to overshadow the economic outlook as the rising infection rates remain a cause for concern. Infections hit a record in the U.S., and hospitalizations are higher but are still below pandemic highs, according to Johns Hopkins University data.
“The mildness of Omicron and therefore, potential for less disruption, less lockdown measures—all of these should feed directly into earnings expectations,” James Athey, an investment manager at Abrdn, told the WSJ.
Investors have usually shifted into tech stocks when economic concerns increase, since these companies can deliver strong growth. However, an improving economic outlook has pushed investors away from expensive tech companies and toward sectors that benefit from a stronger economy.
“Not many predictions for a blowout 2022, so many are allocating towards consistently profitable companies, and away from profitless,” Larry Weiss, head of equity trading at Instinet LLC, told Bloomberg. “It could be the value comeback we’ve been waiting for!”
Furthermore, the rise in yields has also dragged on segments trading at pricey valuations.
“The shift higher in rates are making all of these stocks less attractive,” Danny Kirsch, head of options at Cornerstone Macro LLC, told Bloomberg. “If rates keep going up, I would think this could keep going.”
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