U.S. Stocks Climb, Led by Tech Sector
U.S. stocks opened higher Monday, led by gains in recently battered technology shares.
The Dow Jones Industrial Average added 79 points, or 0.4%, to 21474 shortly after the opening bell. The S&P 500 gained 0.4%, and the Nasdaq Composite rose 0.5%.
Technology shares in the S&P 500 climbed 0.8%. Tech shares are the best performers in the index this year, but have fallen in recent weeks amid concerns about their hefty valuations.
The Stoxx Europe 600 rose 0.8% after Asian markets broadly advanced. Investors scooped up European banking stocks after Italian authorities said Sunday they were prepared to spend as much as EUR17 billion ($19.03 billion) as part of the shutdown of two regional banks.
Italian banks have been a concern for years, weighed down by about EUR200 billion in bad loans, low profitability and insufficient capital. Their troubles have cast a shadow over the wider European banking system, which accounts for a large chunk of regional equity benchmarks.
"It is a very significant step," said Isabelle Mateos y Lago, chief multiasset strategist at BlackRock.
"If finally the issue of [bad loans in] the Italian banking system and overcapacity in some of the regional banks is being addressed, it is a very positive signal," she added.
The Stoxx Europe 600 Banks subindex gained 1.5%, while the FTSE Italia All-Share Banks rose 3.5%. Shares in Intesa Sanpaolo, which is set to buy the best assets of two troubled Italian lenders for a token fee, rose 4.6%. Shares in Italy's largest lender, UniCredit, gained 3.1%.
Elsewhere in Europe, food and beverage shares logged strong gains following news that billionaire activist investor Daniel Loeb's Third Point hedge fund has taken a $3.5 billion stake in Nestlé. Shares in Nestlé added 4%.
A stabilization in oil prices added to the positive tone in markets on Monday. U.S. oil prices entered a bear market last week after falling more than 20% from their February high. That slump came amid a persistent glut in crude prices despite moves to limit production from the Organization of the Petroleum Exporting Countries.
Brent crude oil, the international benchmark, pared earlier gains but still traded up 0.1% at $45.59 a barrel recently. The Stoxx Europe 600 Oil and Gas subindex climbed 0.4%.
In early 2016, a sharp decline in oil prices pushed down major stock indexes as investors worried about the knock-on effects of rising defaults in the energy sector. The energy market is also crucial for the earnings recovery in the U.S., where the sector is expected to account for nearly half of the S&P 500's earnings growth in the second quarter, according to FactSet.
A "protracted shift" of oil prices to $40 a barrel or below during the second half of the year would be needed for central bank reserve managers and sovereign-wealth funds of oil exporting countries to become "significant sellers" of equities and bonds, strategists at J.P. Morgan Chase & Co. wrote in a recent note to clients. Such investors were an important driver of equity and corporate bond selling in 2015 and early 2016, the strategists said.
Gold prices slid as investors shunned havens and moved into riskier assets. Prices were recently down 1.2% at $1,242 an ounce. The Swiss franc and the Japanese yen, which tend to decline when riskier assets rally, were both lower against the dollar and the euro.
Elsewhere in currency markets, the British pound rose slightly after the ruling Conservative Party reached an agreement with Northern Ireland's Democratic Unionist Party to support Prime Minister Theresa May's minority government. The pound was recently up 0.2% against the dollar at $1.2737.
The WSJ Dollar Index, which measures the dollar against a basket of 16 other currencies, was up 0.1% recently.
The yield on the 10-year Treasury note was little changed at 2.143%, according to Tradeweb.
Investors are looking ahead to a raft of inflation data out of Europe and the U.S. this week. Signs that inflation has softened have pushed down bond yields in recent weeks.
"We think we're in a bit of a goldilocks environment," said Ms. Mateos y Lago, with strong economic growth and lukewarm inflation. That means central banks shouldn't rush to raise interest rates, she said.
"Frankly, that is a great environment to be in risk assets globally," she said.
In Asia, the Shanghai Composite Index rose 0.9%, with Chinese stocks continuing to perform strongly following MSCI's decision to add them to its indexes. Gains there also helped boost Hong Kong equities on Monday. The Hang Seng Index rose 0.8%.
Meanwhile, Taiwan's tech-heavy Taiex index gained 1.3% to hit fresh 27-year highs.
In Japan, the Nikkei Stock Average rose 0.1%, with financial stocks weighing on the broader index. Signs that interest rates will remain low continue to weigh on Japanese financials, said Hisao Matsuura, chief strategist for equities at Nomura Japan.
Write to Christopher Whittall at christopher.whittall@wsj.com and Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
June 26, 2017 09:58 ET (13:58 GMT)