S&P 500 jumps more than 1% to a record as Salesforce leads tech higher

The S&P 500 and Nasdaq Composite rose to fresh record highs on Wednesday, building on their rallies off the March lows, as tech shares led the way higher. 

The broader market index advanced 1.1% while the Nasdaq popped 1.8%. The Dow Jones Industrial Average gained 92 points, or 0.3%.

Shares of Salesforce surged more than 26% after the software company posted blowout earnings after the bell on Tuesday.  Salesforce will replace Exxon Mobil, Amgen will replace Pfizer and Honeywell International will replace Raytheon Technologies in the Dow average, S&P Dow Jones Indices said Monday. The changes are driven by Apple’s coming stock split, which will reduce the technology weighting in the price-weighted average.

Facebook and Netflix jumped 7.7% and 11.1%, respectively. Amazon advanced nearly 3% while Alphabet and Microsoft gained 2.7% and 2%, respectively. Apple rose 1.1%. 

Wednesday’s gains put the S&P 500 up more than 58% since hitting an intraday low on March 23. The Nasdaq has soared by 75% in that time period. 

But “if you cut through it all, this rally has really been about five or six stocks,” said Mark Travis, CEO of Intrepid Capital, referring to the major tech names. “I think it creates a bit of a smokescreen as far as what’s really happening below the surface.”

Sentiment on Wednesday was lifted in part by positive news on the coronavirus vaccine front and strong U.S. economic data. 

Moderna said its coronavirus vaccine showed promising results in a small trial of patients aged 56 and older. The company’s stock jumped 6.5% on the news. 

U.S. durable goods orders jumped by 11.2% in July, easily topping a 4.3% estimate from Refinitiv.

Markets have been bolstered “by converts finally joining the party, by recent persistent declines in Covid cases, the halo of ongoing new treatments, and renewed progress on trade negotiations with China,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. 

To be sure, Kansas City Federal Reserve President Esther George told CNBC the risk of a double-dip recession is increasing. 

Later this week, the Federal Reserve will hold its annual symposium on monetary policy. Wall Street will look for clues on further stimulus and where the economy is headed out of the event. Investors will be looking specifically for Powell’s comments on inflation and its impact on the dollar. 

“What Powell says tomorrow about inflation will of course be key as he tells us what he’s rooting for and what threshold he would respond to,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group, in a note. “It’s just a question of what would trigger that first rate hike but an effective vaccine better have the Fed thinking about when.”

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