Tech stocks plunged on Tuesday amid investor concerns over the economy's ability to withstand reduced stimulus and increased coronavirus outbreaks. So, the Nasdaq 100 closed lower, while the S&P 500 climbed to another all-time high, having risen 0.10% yesterday.
Direxion Director David Mazza said this decline in tech stocks could double, as recent comments from Fed officials hint at an early tapering. Last Monday, Atlanta Fed President Raphael Bostic said that another strong boost in employment may provoke the central bank to cut back bond purchases.
Data on US prices will also be closely monitored, following the employment report released Friday last week.
At the same time, the spread of the highly contagious Delta variant has raised fears that recovery from the pandemic will be thwarted, as the number of infections in the US has risen to its highest weekly level since early February and deaths have increased the most since December.
Even so, LPL Financial strategist Barry Gilbert said the S&P 500 is likely to gain in the coming months despite increased market volatility. Social distancing has helped limit contagion, but growth will slow because some restrictions are re-introduced and consumers are becoming more cautious.
CIBC CIO David Donabedian also predicted a stock rally, explaining that the markets have assessed COVID-19 as a manageable risk and are relying on a strong economy.
Other important events this week are:
- Statements from Kansas City Fed President Esther George;
- data on US CPI (Wednesday);
- monthly oil market report from OPEC (Thursday).
