April 23 (Reuters) – U.S. stocks rose in a broad rally on Friday as increased factory output and housing data supported expectations of a swift economic recovery,while big tech stocks rose in anticipation of strong earnings reports next week.
The bounceback follows a sell-off on Thursday when reports that U.S. President Joe Biden plans to almost double the capital gains tax spooked some investors. Analysts dismissed the sell-off as a knee-jerk reaction, saying equities are poised for new highs.
The broad-based S&P 500 rose more than 1%, trading just below what would be a new record close, while the tech-heavy Nasdaq scored a bigger percentage gain.
Earnings take center stage next week when 40% of the S&P 500’s market cap report on Tuesday through Thursday, including the tech heavyweights of Microsoft Corp, Google parent Alphabet Inc, Apple Inc and Facebook Inc .
Those names, including Amazon.com Inc, supplied the biggest upside to a rally where advancing shares easily outpaced decliners.
Companies are providing guidance after staying quiet during the pandemic, while lower bond yields and results that beat estimates are driving the rally, said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.
“There is a lot of anticipation of what’s to come,” he said. “We’ve seen actual reports beating these very high expectations. Yields have come back down, which is very positive for tech.”
First-quarter earnings are expected to increase 33.9% from a year ago, the highest quarterly rate since the fourth quarter of 2010, according to IBES Refinitiv data.
U.S. factory activity powered ahead in early April. IHS Markit’s flash U.S. manufacturing PMI increased to 60.6 in the first half of this month, the highest reading since the series started in May 2007.
In another sign of strong consumer demand, sales of new U.S. single-family homes rebounded more than expected in March, likely boosted by an acute shortage of previously owned houses on the market.
All the 11 major S&P 500 sectors were higher, with technology and financials leading gains.
Ron Temple, head of U.S. equity at Lazard Asset Management, said the U.S. economy is about to post the strongest growth in the past 50 years, with more than 6% gains both this year and next. The Federal Reserve, meanwhile, will allow the economy to run hotter than in the past, adding to the high-growth outlook.
“Investors are gradually coming around to the sheer magnitude of excess savings, pent-up demand and the implications of such a massive wave of fiscal stimulus,” Temple said.
The S&P 500 gained 1.16% at 4,182.88, and the Dow Jones Industrial Average rose 0.69% to 34,047.78. The Nasdaq Composite added 1.56% at 14,034.01.
Earnings reports in the day were lackluster, with American Express Co sliding 2.1% after reporting a slump in credit spending and lower quarterly revenue.
Honeywell International fell 2.0% after it missed revenue expectations for its aerospace division, its biggest business segment.
Naked Brand Group, jumped 5.9% after shareholders approved the proposed divestiture of the company’s Bendon brick-and-mortar operations.
Image sharing company Pinterest Inc gained 2.6% as Credit Suisse raised its price target, saying its newer product offerings and expanding footprint in markets abroad will yield higher revenue and user growth.
Advancing issues outnumbered declining ones on the NYSE by a 3.65-to-1 ratio; on Nasdaq, a 2.65-to-1 ratio favored advancers.
The S&P 500 posted 71 new 52-week highs and no new lows; the Nasdaq Composite recorded 94 new highs and 20 new lows.
(Reporting by Herbert Lash; Additional reporting by Shivani Kumaresan and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila, Arun Koyyur and Richard Chang)