U.S. stocks moved higher in a choppy trading session Tuesday as investors assessed corporate earnings reports and grappled with concerns over how the global economy will withstand the delta variant of the coronavirus as well as Chinese regulatory action against technology stocks.
What are major indexes doing?
The Dow Jones Industrial Average
rose 213.18 points, or 0.6%, to 35,051.34.
The S&P 500
was up 26.16 points, or 0.6%, at 4,413.32.
The Nasdaq Composite
gained 33.40 points, or 0.2%, to trade at 14,714.47.
U.S. stocks couldn’t hold early gains on Monday with the Dow Jones Industrial Average and the S&P 500 both ending lower, while the tech-heavy Nasdaq Composite squeaked out a slight gain. The combined volume on the New York Stock Exchange and Nasdaq was the seventh lowest of the year.
What’s driving the market?
Stocks edged higher early afternoon, with all three major benchmarks in positive territory after choppy trading seen in the morning.
The market is grappling with “a global macro backdrop of uncertainty,” with investors worried about China’s crackdown on technology companies and the rise in Covid-19 cases, said George Catrambone, head of Americas trading at DWS, in a phone interview Tuesday. Concerns over a potential slowdown in economic growth “is weighing on people’s consciousness” as U.S. stocks trade near all-time highs, he said.
Still, “on a relative value basis, people continue to see equities as an opportunity,” said Catrambone, as investors consider them next to low yields offered in the fixed income market. They’ve shown a willingness to buy stock-market dips, he said.
Meanwhile, mask mandates have been reintroduced in various U.S. regions including Louisiana and San Francisco to confront the delta strain of the coronavirus after the seven-day average of new coronavirus cases surpassed the peak seen last summer, according to the CDC Director Dr. Rochelle Walensky. However, the U.S. on Monday achieved the 70% vaccination target set by President Joe Biden.
Elsewhere in the battle against COVID-19, China announced fresh mass testing in Wuhan, the city where the disease was first discovered.
“The delta variant has emerged as a credible downside risk to market performance, but one that we expect to slow, not derail, the recovery,” said Lauren Goodwin, economist and portfolio strategist at New York Life Investments, in a note.
“Consumers have learned to live with the virus, and the widespread availability of vaccines makes renewed shutdowns politically difficult. Consumers will continue to rely on healthier finances and excess savings to fuel strong spending this year,” she said.
In economic data, U.S. factory orders rose 1.5% in June on stronger demand for airplanes, oil and other industrial goods, in data published Tuesday, but more recent data published Monday showed a weaker-than-expected reading on July U.S. manufacturing activity from the Institute for Supply Management.
U.S. Treasury yields edged lower again Tuesday, and analysts said concerns over peaking economic growth could remain a concern.
With that in mind, Friday’s July jobs report could attract “special attention,” said Charalambos Pissouros, head of research at JFD Group, in a note, as it pertains to the Federal Reserve’s path toward tapering its monthly asset purchases.
If expectations for strong numbers are met, it could undermine Fed Chairman Jerome Powell’s assertion last week that the jobs market had a long way to go before meeting the central bank’s goals, Piossouros said, potentially reviving speculation over early tapering.
“The U.S. dollar could rebound on a strong employment report, but equities could pull back, as earlier QE tapering could mean earlier rate hikes as well,” the analyst said.
Investors also continue to wade through corporate earnings reports. As of last Friday, 88% of S&P 500 index companies had reported beating earnings estimates for the second quarter, the highest percentage since FactSet began tracking this data in 2008.
“The continued healthy earnings outlook is a key driver of our view that the equity bull market remains on solid footing,” said Solita Marcelli, chief investment officer for the Americas at UBS Global Wealth Management, in a note.
“The outlook is further supported by a still-accommodative Fed and the fact that stocks look quite attractive relative to very low yielding bonds,” she said.
Which companies are in focus?
Shares of PepsiCo Inc.
rose 0.2%, after the beverage and snacks company announced an agreement to sell Tropicana, Naked and other juice brands across North America for $3.3 billion in cash to PAI Partners.
Alibaba Group Holding Ltd.
topped earnings estimates Tuesday but fell slightly short of revenue expectations, while also announcing a boost to its buyback program. U.S.-listed shares fell 2%.
Shares of Eli Lilly & Co.
were up 2.9% after the drugmaker missed second-quarter profit expectations while revenue beat, as gross margin as a percentage of revenue fell due primarily to an excess inventory charge related to COVID-19 antibodies.
Mall operator Simon Property Group SPG late Monday raised its full-year guidance and lifted its dividend payment after reporting 92% occupancy. Shares rose 1.8%.
Office-building owner Vornado Realty Trust VNO met second-quarter estimates and reported a 97% rent collection rate. Shares were down 3%.
Outdoor clothing maker Columbia Sportswear COLM lifted its sales guidance. Shares advanced 1%.
Videogames maker Take-Two Interactive TTWO guided toward a weaker current quarter than analysts expected. Shares dropped almost 9%.
Chinese videogame makers, including Tencent
tumbled in Hong Kong trade after a report suggested authorities would take action against them.
What are other markets doing?
The yield on the 10-year Treasury note
was little changed at 1.185%. Yields and debt prices move in opposite directions.
The ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was up about 0.1%.