Investors put battered grocery-store names on their shopping lists Monday, helping lift the broader market amid a rally in technology shares, after sending them plunging Friday in the wake of Amazon’s (AMZN) stunning $13.7 billion Whole Foods (WFM) buy.
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The move is a “huge disruptor” for the grocery sector on both ends of the spectrum, said Bahige El-Rayes, a principal in global strategy and management consulting firm A.T. Kearney, which means more movement in share prices is likely on the horizon.
“It means that we’ll be seeing two main categories of winners, first those who are investing in e-commerce, the Amazons and Walmarts, and secondly the discounters like Lidl and Aldi,” he said. “Everyone else will be under pressure, including traditional groceries and small online players.”
Shares of America’s biggest technology companies – including Apple (AAPL), Microsoft (MSFT) and Google parent company Alphabet (GOOGL), also rebounded Monday as the S&P technology sector rose nearly 1% after notchingits second-straight week of declines. Worries about stretched market valuations have spread across trading desks, as investors move to take profits from the sector’s meteoric rise. So far this year, the tech heavy Nasdaq Composite index is up more than 16%.
Technology and growth stocks have become a source of funds for investors looking to protect themselves against risk of the Federal Reserve is continuing to move along its rate-rise path in an effort to stave off inflationary pressures that might not come to fruition, said Dennis DeBusschere, managing director at Evercore ISI.
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“A rotation into value as long term leading indicators and inflation expectations weaken is usual, but slow nominal growth and depressed volatility have supported an atypical period of growth-factor leadership as well,” he said, pointing to the recent decline in so-called FAANG shares – Facebook (FB), Apple, Amazon, Netflix (NFLX) and Alphabet.
As of 11:45 a.m. the Dow Jones Industrial Average added 112 points, or 0.52% to a new record high of 21496 while the broader S&P 500 gained 16 points, or 0.68% to 2449 and the Nasdaq Compoiste rose 73 points, or 1.19% to 6225.
As the tech sector rose the most on the session, financials and health care were among the biggest gainers as energy, utilities and telecommunications declined.
Though the economic data calendar is light for the week, investors are looking forward to results of the Fed’s annual stress tests after the bell Thursday, which are expected to bear few surprises. What’s more, political uncertainty has faded somewhat recently, with House Speaker Paul Ryan expected to give a “major” speech Tuesday on tax reform, helping ease concern about the Trump administration’s efforts to pass fiscal policy reforms amid ongoing headlines about a probe into his alleged Russia ties.