By Yasin Ebrahim
Investing.com – The Dow cut some losses Tuesday, but remained under pressure amid a rout in tech on jitters about rising inflation, while value stocks rode the favorable economic backdrop as infections decline and efforts on rolling out another round of stimulus continue.
The Dow Jones Industrial Average fell 0.26%, or 82 points. The S&P 500 was down 0.47%, while the Nasdaq Composite slumped 1.58%.
"Themes such as small-cap stocks; value versus growth and financials" could emerge as the new leadership for the market as it would "be highly unlikely (though not impossible) for the same index [Nasdaq] to replicate these types of gains [45% in 2020] two years in a row," Janney said in a note.
The pivot to value stocks has been driven by a brighter outlook for the economy. Covid-19 infections continue to decline, the pace of vaccine rollouts is increasing, and President Joe Biden's $1.9 trillion stimulus is expected to be rolled out sooner than later.
Despite the expectations for a stronger reopening and recovery, Federal Reserve Chairman Jerome Powell reiterated Tuesday that the economy remains "a long way" from the central bank's employment and inflation goals." The economy is likely to "take some time for substantial further progress to be achieved," Powell added.
Energy and financials were among the value sectors in the green, with the latter led by gains in People’s United Financial Inc (NASDAQ:PBCT) for the second day following its impending $7.6 billion takeover by M&T Bank Corp (NYSE:MTB). Other financial companies including State Street (NYSE:STT) Corp and Hartford Financial Services (NYSE:HIG) were 2% higher.
Energy, added to gains from a day earlier, up 1%, as investors looked ahead to another weekly U.S. inventory report in the U.S., expected to show a sharp draw in the crude stockpiles that will boost expectations for a speedier pace of rebalancing.
Technology, which has led broad-market rally since the pandemic lows in March, continued to be shunned in favor of value amid expectations for pick in inflation. Investors in growth stocks like tech, with high valuations, usually have to wait longer to recoup their investments, which is unattractive in an inflationary environment, where money today, is worth more than money in the future.
Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Amazon.com (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOGL) were down. Facebook (NASDAQ:FB) climbed 0.7% after agreeing to reaching a deal to restore news pages in Australia.
Still, it's too early to throw in the white flag on tech as the sector "will likely to be an ongoing leader and in many respects within this secular expansion story in the U.S," Janney added.
In the earnings front, Home Depot (NYSE:HD), a major Dow component fell 4% despite delivering a fourth-quarter report that beat Wall Street estimates on the top and bottom lines.
In other news, Churchill Capital IV (NYSE:CCIV) slumped 31% after it confirmed a long-running rumor that it would be merging with Lucid Motors, an early stage electric vehicle company. Lucid will delay production for its EVs from this spring to the the second half of this year.
AT&T (NYSE:T), meanwhile, rose 0.5% as the telecoms giant is reportedly nearing a deal to sell a large bulk of a minority stake in its DirecTV and U-verse business to private-equity firm TPG, CNBC reported, citing people familiar with the matter.