Solid Recovery by Tech Stocks Sends Dow, S&P to Record Highs

The major U.S. stock indexes posted strong gains on Monday on increased demand for higher risk assets and a solid recovery in technology stocks after a two week setback.

In the cash market, the benchmark S&P 500 Index closed at 2453.46, up 20.31 or +0.83%. The blue chip Dow Jones Industrial Average finished the session at 21528.99, up 144.71 or +0.68%. The technology-based NASDAQ Composite settled at 6236.71, up 84.95 or +1.38%.

Large-cap technology stocks like Facebook, Amazon, Apple, Netflix and Google-parent Alphabet led the rally. Amazon also hit an all-time high early in the session.

Economic News

There were no major U.S. economic releases on Monday, but investors did get the opportunity to react to comments from a key Federal Reserve policymaker.

Shortly before the stock market opening, New York Federal Reserve President and Federal Open Market Committee Member Bill Dudley said inflation should pick up as wages rise along with continuing improvement in the labor market.

U.S. Treasury Yields

The benchmark U.S. 10-year Treasury yield climbed to 2.19 percent after FOMC Member Dudley made his statement about inflation. Despite last week’s rate hike, investors are still skeptical the central bank will be able to tighten rates against this year due to low inflation. According to the CME Group’s FedWatch tool, the chances for a September rate hike are just 13 percent.

Crude Oil

Crude oil prices fell sharply on Monday, extending last week’s losses on concerns over rising production in the United States. Libya and Nigeria. Investors fear that these production increases will offset the OPEC-led initiative to reduce output, trim the global supply glut and stabilize prices.

Investors were also concerned over lower demand in Asia. According to reports, Japan’s crude imports fell 13.5 percent in May and India imported 4.2 percent less.

Saudi Energy Minister Khalid al-Falih said the oil market needed time to rebalance, pointing to a draw of around 50 million barrels from floating storage and a drop in industrial nations’ onshore storage compared to July last year.

Gold

A hawkish comment from FOMC Member William Dudley drove up Treasury yields on Monday, making the U.S. Dollar a more desirable investment. This put pressure on dollar-denominated gold. Traders said the sell-off was softened by concerns over the start of Brexit negotiations.