The S&P 500 edged higher on Tuesday, as investors rotated into economically sensitive cyclical stocks, optimistic that Washington will deliver a new round of stimulus to sustain the U.S. economic recovery from a pandemic-induced recession.
Financial, industrial and energy stocks gave the biggest boosts to the bellwether S&P 500 and blue-chip Dow as investors pivoted back to cyclicals. The march upward lost steam late in the session, and a drop in tech shares pulled the Nasdaq lower. The TSX closed modestly down as well, despite a big rally in energy stocks, as tech star Shopify retreated 6.37%.
The S&P 500 has moved into positive territory year-to-date, up 0.8%. The Nasdaq has gained 19% since Jan. 1, while the Dow remains down 6%.
The S&P 500 is now within 4% of its record closing high reached late in February.
“Economically sensitive areas are doing very well today,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “My guess is it’s because of the stimulus here and in Europe and decent earnings reports from a variety of different companies.”
As new infections of COVID-19 surged in the United States, lawmakers on Capitol Hill wrestled to craft a new stimulus package with less than two weeks until the expiry of extended unemployment aid for millions of Americans.
“A pick-up in demand is being seen throughout the economy as things have opened up,” Tuz added. “We’re at the cusp of continuing with the recovery or stagnation.”
Elsewhere, the 27-member European Union reached an agreement on a massive US$857 billion pandemic recovery plan at the conclusion of a rocky, five-day summit.
The Dow Jones Industrial Average rose 159.53 points, or 0.6%, to 26,840.4, the S&P 500 gained 5.46 points, or 0.17%, to 3,257.3 and the Nasdaq Composite dropped 86.73 points, or 0.81%, to 10,680.36.
Of the 11 major sectors in the S&P 500, seven ended the session in the black.
Energy companies rose 6.2%, the largest daily jump since June 5, as crude prices climbed amid signs of rebounding demand.
The S&P/TSX Composite Index closed down 20.70 points, or 0.13%, at 16,162.96. The energy sector spiked 8.92%, but in addition to tech, industrials, consumer staples, real estate and telecom sectors all ended lower for the day.
West Texas Intermediate (WTI) settled at $41.96 a barrel, gaining $1.15 cents, or 2.82%. Prices were buoyed by the agreement among European Union leaders on a fund to prop up coronavirus-hit economies.
But energy equities easily outpaced gains in the price of crude itself, dominating the top gainers on the TSX. Cenovus Energy rose 11.5%, Canadian Natural Resources gained 10.5%, and Imperial Oil 8.2%.
In the U.S., second-quarter reporting season rolled on, with 58 constituents of the S&P 500 having reported. Of those, 77.6% have come in above consensus, according to Refinitiv data.
But expectations have set a low bar. Analysts now see aggregate S&P 500 earnings for the April to June period having declined by 41.8% year-on-year, per Refinitiv.
Coca-cola Co shares gained 2.3% after the beverage maker beat earnings estimates and said demand is improving.
Defense industrial Lockheed Martin Corp topped quarterly consensus estimates and raised its full-year profit and revenue estimates, sending its shares up 2.6%.
Tesla Inc fell 4.5%, retreating from Monday’s record closing high after JPMorgan Chase downgraded the electric car maker’s stock to “market perform.”
United Airlines Holdings Inc shares rose more than 1% in after-hours trading. After the bell, the commercial air carrier posted an adjusted net quarterly loss of $2.6 billion but reported improved cash burn.
Canadian National Railway after the close posted adjusted earnings that matched Street expectations.
Globe staff, Reuters
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