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S&P 500, Nasdaq gain as investors buy tech shares beaten up this week

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The S&P 500 and Nasdaq Composite were both higher on Wednesday as traders added exposure to tech names that were hard hit earlier in the week.

The S&P 500 rose 0.5% while the tech-heavy Nasdaq advanced 1.4%. Apple gained 1.9%. Netflix climbed 0.7%. Facebook and Amazon rose 1.8% and 2.5%, respectively. Alphabet traded 0.9% higher and Microsoft was up by 2.3%.

Meanwhile, the Dow struggled, falling 24 points after giving up an earlier gain of more than 150 points. The Dow was coming off two back-to-back strong sessions following Pfizer and BioNTech’s announcement about their more than 90% effective Covid-19 vaccine.

“An abrupt macro positive shock such as we saw this week can lift all value stocks for a time,” Inigo Fraser-Jenkins, co-head of the portfolio strategy team at Bernstein, wrote in a note. “However, we think that the outlook for the next year has to be more nuanced.”

“Real yields are likely to be held low and there is still a greater longevity of growth for high Growth companies, thus we think it is right to remain overweight Growth companies where [it is reasonable] to believe their growth can be sustained,” Fraser-Jenkins said.

Eli Lilly’s antibody drug was cleared by the Food and Drug Administration for emergency use late Monday. The agency said the drug could be used to treat mild-to-moderate cases of Covid-19 in patients who are older than 12 years old.

The news caused investors to move out of technology names and stay-at-home stocks and into cyclical stocks that hinge on a recovering economy. The energy sector is up 17% this week, as oil prices gain on hopes of improving demand. The financial sector has risen about 8% since Monday.

Both sectors were under pressure on Wednesday, however. Energy dipped 0.1% and financials slid about 1%.

“The leadership rotation away from technology and Fangs toward broader market plays including small caps, cyclical sectors and international stocks strengthened for a second consecutive day,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC.

“Since the vaccine announcement before yesterday’s open, investors have been selling ‘stay at home stocks,’ mostly technology and communications, and buying ‘economy re-opening stocks.’ The continuation of this trend [Tuesday] has only convinced more investors this new trend may persist,” he added.

The vaccine and antibody drug news comes as the United States once again topped its prior day record of daily new Covid-19 infections, on a seven-day average, while also crossing the bleak milestone of more than 10 million cases nationwide on Monday. The seven-day average of daily new cases Monday was 108,964, a 37% increase from a week ago, according to a CNBC analysis of data from Johns Hopkins University.

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