Nasdaq closes up on tech stocks strength, as hawkish Fed limits S&P

Conviction in the strength of the economic recovery pushed investors into U.S. technology stocks on Thursday, driving the Nasdaq higher, although a post-Fed hangover left a subdued S&P nursing a very minor loss.

The marginal decline was the S&P’s third negative finish in a row, while the Dow – with a more pronounced drop – posted its fourth straight lower close.

Many investors were still processing the Federal Reserve’s unexpectedly hawkish message on monetary policy from the previous day, which projected the first post-pandemic interest rate hikes in 2023.

Fed officials cited an improved economic outlook as the U.S. economy recovers quickly from the pandemic, with overall growth expected to hit 7% this year. While careful not to derail the recovery – with no end in sight for supportive policy measures such as bond-buying – the rate-rise signal highlighted concerns about inflation.

“I think there was a scenario that people had in mind, that the Fed was going to allow for a larger and longer inflation overshoot, and I think with the increase in the dot plot yesterday… people are rethinking that scenario,” said David Lefkowitz, head of equities for the Americas at UBS Global Wealth Management.

Technology shares, which generally perform better when interest rates are low, powered a rally on Wall Street last year as investors flocked to stocks seen as relatively safe during times of economic turmoil.

Investors returned to such positions on Thursday. Chipmaker Nvidia Corp (NVDA.O) jumped 4.8%, posting its fourth consecutive record close, after Jefferies raised its price target on the stock.

Meanwhile, shares of Apple Inc (AAPL.O), Microsoft Corp (MSFT.O), Amazon.com Inc (AMZN.O) and Facebook Inc (FB.O) shook off premarket declines to advance between 1.3% and 2.2% as investors bet that a steady economic rebound would boost demand for their products in the long run.