Big technology groups pushed higher as Wall Street searched for direction ahead of a big week for corporate earnings and further stimulus talks on Capitol Hill.
The blue-chip S&P 500 index was up 0.2 per cent in afternoon trading in New York amid further gains for Apple and Tesla, while the energy and financial sectors dragged.
The tech-heavy Nasdaq Composite rose 0.5 per cent, after settling at a record high last week, having been up more than 1 per cent earlier on Monday.
Sector-by-sector performance suggested that the rotation out of technology and into economically-sensitive sectors, which had been sparked by the arrival of Covid-19 vaccines, had been put on hold. On both sides of the Atlantic, tech sectors were leading bourses.
The market has pinned its hopes on extra fiscal support for the world’s largest economy, but the scope of a new US relief bill is uncertain. Joe Biden, the new president, has put forward a $1.9tn package that has faced resistance from some lawmakers wary of passing another huge bill, particularly with vaccinations ramping up.
“What’s driving the market is the ongoing discussion over the stimulus in the US,” said Joost van Leenders, senior investment strategist at Kempen Capital Management.
Officials in the Biden administration are working to get a speedy deal. During a Sunday call with lawmakers, some Republicans pushed for a smaller plan focused heavily on funding vaccine distribution and stripping out some campaign pledges from Mr Biden including the raising of the minimum wage.
The economic cost of the pandemic continues to weigh on investor confidence. Jim Reid, strategist at Deutsche Bank, said vaccinations were being rolled out slower than expected in virtually all large countries and “even in countries where it’s been quicker . . . the one-dose-first strategy means that full protection will be slower to materialise”.
“It also doesn’t seem to be the case that just vaccinating the vulnerable will be enough to lift most restrictions as I’d expected,” he added.
US consumer stocks such as Clorox, Kroger and Kleenex maker Kimberly-Clark were up there with tech among the best performers in the S&P 500 on Monday, a sign that investors expect the pandemic will continue to drive sales of cleaners and grocery staples.
In Europe, the continent-wide Stoxx 600 index fell 0.8 per cent, while London’s FTSE 100 benchmark dropped 0.8 per cent and Frankfurt’s Xetra Dax sank 1.7 per cent.
Tech stocks led the charge in Hong Kong, with shares in internet group Tencent up almost 11 per cent. Tencent-backed livestreaming platform Kuaishou plans to raise up to $6.3bn in a Hong Kong initial public offering, the Financial Times reported on Monday.
“We’re expecting Kuaishou will be very hot,” said Dickie Wong, head of research at Hong Kong-based broker Kingston Securities. “That is boosting not only Tencent’s share price but also most internet-related companies.”
Hong Kong’s Hang Seng rose 2.4 per cent. China’s CSI 300 index ended 1 per cent higher, with prices up across most sectors.
Some investors are, however, looking beyond the health crisis. “There’s a bit of a tug of war between concern over the lockdowns and optimism over the rollout of the Covid-19 vaccinations, but I think the market will continue to look ahead,” Mr van Leenders said.
Optimism over a recovery in fuel demand supported oil prices. Brent crude rose 0.9 per cent to $55.88 a barrel, leaving the international benchmark near its highest level since February.
Attention will turn to a wave of earnings results this week, with Apple, Facebook and Tesla scheduled to release updates. Analysts will be watching to see if earnings progress can support rising valuations, with some veteran investors warning of a “bubble” in prices.