U.S. stock-indexes are advancing Tuesday afternoon, after Federal Reserve Gov. Lael Brainard called for sustained large-scale asset purchase by the U.S. central bank to help the economy rebound amid a “thick fog of uncertainty” brought on by COVID-19.
Investors also have been monitoring the start of corporate earnings reporting season, some U.S. states closing down businesses again with coronavirus cases rising, and deteriorating U.S.-China relations.
What are major indexes doing?
The Dow Jones Industrial Average DJIA, +1.49% gained 416 points, or 1.6%, to trade at 26,504, while the S&P 500 SPX, +0.51% was up 23 points at 3,179, a gain of 0.8%, as energy shares and materials shares rallied. The Nasdaq Composite Index COMP, -0.21% was 17 points, or 0.2%, higher at 10,408, after trading negative earlier in the session.
The Dow on Monday eked out a gain of 10.50 points, a rise of less than 0.1%, to end at 26,085.80, while the S&P 500 shed 29.82 points, or 0.9%, to close at 3,155.22. The Nasdaq led the market action, trading at an intraday record in the early going before turning south hard in afternoon activity to finish the day down 226.60 points, or 2.1%, at 10,390.84.
What’s driving the market?
Stocks marched higher on Tuesday, after Fed Governor Lael Brainard said the U.S. central bank should use large-scale asset purchases for a “sustained” period to help the economy rebound amid a “thick fog of uncertainty” brought on by COVID-19.
Brainard also warned that the U.S. economic recovery likely “will face headwinds for some time,” and require further accommodation, while speaking during a virtual event hosted by the National Association for Business Economics.
Investors also parsed earnings reports from some of the nation’s largest banks, which offered some insights about the outlook for the domestic economy that has been ravaged by the coronavirus pandemic.
Banking giant JPMorgan Chase & Co. JPM, +0.45%, saw earnings fall sharply, even if they topped expectations. Wells Fargo & Co. WFC, -4.70%, saw its shares punished after reporting a deeper-than-expected loss, and Citigroup Inc. C, -3.83% shares also lost ground even as its earnings topped expectations.
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The bank sector earnings reports come as investors who think stocks have rallied too far off the March lows, sold assets on Monday partly in response to the spreading pandemic in the U.S. and other parts of the world.
Analysts attributed blame for the stock market’s weakness so far this week in part on California Gov. Gavin Newsom’s order to rollback indoor operations at restaurants, as well as bars, zoos, wineries, museums, and movie theaters, igniting fresh worries that the economic rebound from the COVID-19 pandemic may be longer than the rebound in equities imply.
“The last two hours of trade were a really nasty unwind of sorts,” said Sahak Manuelian, a managing director of equity trading at Wedbush Securities in Los Angeles, of Monday’s tech-heavy rout. But he also underscored that recent bouts of weakness in equities have been short lived. “The issue is nothing seems to stick.”
Manuelian attributed the recovery trend to unprecedented global monetary and fiscal stimulus already sloshing through markets with an aim to blunt economic fallout of the pandemic. “It’s like nothing we’ve ever seen,” he told MarketWatch.
The U.S. death toll stands at 135,615 and is rising again after it had started to flatten in mid-to-late April. There are now 41 U.S. states and regions showing increasing cases over a 14-day period, according to a New York Times tracker. Also, France and the U.K. on Tuesday extended rules requiring face coverings in public, while Hong Kong and India reimposed restrictions on movement to help contain outbreaks.
While stocks have largely traded sideways since early June, technology stocks, as evidenced by the tech-heavy Nasdaq, have rallied on expectations that major players will remain largely immune to the effects of the pandemic, benefiting from shifts to distance learning, and working from home.
On the U.S. data front, the National Federation of Independent Business said its Small Business Optimism Index rose to 100.6 in June, a 6.2 point increase from May’s reading.
The June consumer-price index rose 0.6%, while the core reading, which strips out volatile food and energy prices, was up 0.2%. Economists surveyed by MarketWatch had forecast a 0.5% rise in the overall figure, while the core reading matched expectations.
St. Louis Federal Reserve president James Bullard also Tuesday called the pandemic a “more persistent” threat to the U.S. economy than initially expected, adding that a broad adoption of mask usage is needed to avoid a potential economic depression.
Meanwhile, U.S. – China relations are deteriorating again, impacting technology stocks. The Trump administration rejected China’s claims in the South China Sea, while China announced it was imposing sanctions on Lockheed Martin Corp. LMT, +0.23% after the U.S. approved a deal for the supply of missile parts to Taiwan, and the U.K. reversed its policy by banning Chinese telecoms company Huawei.
Which stocks are in focus?
- Shares JPMorgan Chase JPM, +0.45% were up 0.5% after delivering results.
- Citigroup C, -3.83% shares were down 3.6%.
- Shares of Wells Fargo & Co. WFC, -4.70% tumbled 5%, enough to pace the large-capitalization banking sector’s decliners, after the bank reported second-quarter results that missed expectations.
- Shares of Delta Air Lines Inc. DAL, -2.83% were down 2.6% after reporting a larger-than-expected second-quarter loss.
- Amazon.com Inc. AMZN, -2.74% said Tuesday it was collaborating with primary care services provider Crossover Health to establish health centers near Amazon fulfillment centers and operations facilities around the country. Shares were off 2.2%.
- Shares of Spotify Technology S.A. SPOT, -0.64% sank 0.9% to extend the previous session’s pullback, after UBS analyst Eric Sheridan swung to bearish from bullish on the music streaming platform, saying future opportunities are “more than priced in.”
- Shares of Tesla Inc. TSLA, -0.11% climbed 0.4% after Piper Sandler analyst Alexander Potter raised his price target on the stock to $2322 from $939, writing of “faster-than-expected share gains” and big opportunities in software.
- Shares of Harley-Davidson Inc. HOG, +5.40% rallied 5.8% Tuesday, after BMO Capital’s Gerrick Johnson became the most bullish analyst covering the motorcycle maker following an upgrade and price target boost.
- Beyond Meat Inc. BYND, +0.47% products will be sold at select Metro China locations in Shanghai starting July 15, Metro China announced Tuesday. Shares were up 0.7%.
- Shares of 3M Co. MMM, +1.86% headed 2% higher on Tuesday after the company said it is developing a rapid diagnostic test for COVID-19 that would be used at the point of care.
- Shares of Bed Bath & Beyond Inc BBBY, +8.62% rose 10.5% Tuesday, after the home-accessories retailer said June same-store sales were “positive” for reopened stores and digital channels.
- Netflix Inc. NFLX, -2.09% stock falls 1.6% Tuesday after an analyst at UBS downgraded the company to neutral from buy, writing that the company looks poised to report a strong June quarter during COVID-19 lockdowns, that investors seem to have already priced in these benefits to Netflix’s shares.
How are other markets trading?
In Asia, the Shanghai Composite SHCOMP, -0.83% fell 0.8%, while the CSI 300 Index 000300, -0.95% declined 1%. Japan’s Nikkei 225 Index NIK, -0.86% retreated 0.9%, while the Hang Seng Index in Hong Kong HSI, -1.14% closed 1.1% lower.
In Europe, the pan-European SXXP, -0.83% Stoxx 600 Europe Index closed 0.8% lower, while London’s FTSE 100 UKX, +0.05% gained 0.1%.
The yield on the benchmark 10-year Treasury note TMUBMUSD10Y, 0.614% was off 3 basis points at 0.609%. Yields and bond prices move in opposite directions. The ICE U.S. Dollar Index DXY, -0.18%, a measure of the currency against a basket of six major rivals, was off 0.2%.
Oil futures closed higher, with the U.S. benchmark CL.1, +0.27% up 0.5%, or 19 cents, to end at $40.29 a barrel. Gold GC00, -0.23% futures declined 0.04%, or 70 cents, settling at $1,813.40 an ounce.
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