Stocks gained on Tuesday, reaching fresh all-time highs as optimism over earnings and the economic reopening at least temporarily outweighed lingering concerns over the virus and changes to monetary policy.
The S&P 500 edged up to fresh record intraday and closing highs. Big Tech stocks including (AMZN) added to gains, and the Nasdaq outperformed to also set new record levels. “Reopening” stocks including the airlines and cruise lines also increased after rising on Monday, with optimism over a broader leisure and travel recovery coming after the U.S. Food and Drug Administration granted full approval to Pfizer (PFE) and BioNTech’s (BNTX) COVID-19 vaccine.
Shares of Chinese technology companies rose, shaking off the past several weeks’ steep declines amid a regulatory crackdown of the major tech firms in China. The jump came after Ark Investment Management — run by the closely watched investor Cathie Woods — scooped up shares of Chinese e-commerce company JD.com (JD) following the firm’s better-than-expected quarterly results. Peers including Alibaba (BABA) and Baidu (BIDU) also advanced, and the Hang Seng index (^HSI) increased by 2.5%.
Investors are also eagerly awaiting the Federal Reserve’s virtual Jackson Hole Symposium beginning on Thursday. The event is expected to serve as another forum for central bank officials to discuss their assessment of economic conditions, and offer hints as to when the Fed might announce and eventually begin the process of tapering its crisis-era asset purchase program.
New economic data out at the start of the week disappointed relative to Wall Street’s estimates, with an index tracking activity in the U.S. services sector cooling to an eight-month low as concerns over the Delta variant started to weigh on demand.
Despite the ongoing risks around the virus, however, three major factors have served to help keep equity markets marching toward fresh all-time highs, according to one strategist.
“The first one, that’s extremely low discount rates. The 10-year Treasury yield is barely off the August lows,” Michael Darda, MKM Partners chief economist, told Yahoo Finance. “So all things equal, if interest rates are low, if discount rates are low, valuations will tend to be higher because of a lack of competition.”
“In addition to that, we have a very high liquidity environment … and earnings have been incredibly strong,” he added. “Typically when long-term interest rates are falling, earnings or the economy is faltering. In this case, the earnings have been quite robust, really historic. So we’re really going to need to see one of those three pillars disturbed in some fashion for a big decline in equity prices.”
Others offered a similarly upbeat take on the trajectory for U.S. equities.
“We think the primary trend is higher,” Keith Lerner, Truist Wealth chief market strategist, told Yahoo Finance. “You’re only about one year into this economic expansion. Economic expansions last about five years. And the earnings season which we just got out of was phenomenal once again.”
“Even if it’s peak growth, we still think it’s going to be strong growth,” he said. “You have earnings moving forward, and then you look at the relative comparison of stocks relative to bonds and they’re still attractive … Overall we think the right position is to be overweight stocks.”
2:47 p.m. ET: WTI crude posts back-to-back session of gains, settling higher by nearly 3%
U.S. crude oil prices gained for a second straight session, building on advances after a seven-session losing streak last week.
West Texas intermediate crude oil rose by nearly 3% on Tuesday to settle at $67.54 a barrel. Brent crude, the international standard, also gained to top $71 per barrel.
Energy prices gained as optimism mounted over a pick-up in consumer mobility following the full FDA approval of Pfizer’s coronavirus vaccine. U.S. crude oil prices have so far risen 39% for the year-to-date.
12:50 p.m. ET: Why cyclical sectors may still have room to run: Strategist
As markets jump to all-time highs, a rotation has been under way beneath the surface, with cyclical and growth stocks vying for leadership amid dual concerns over the pace of the economic recovery and path forward for monetary policy. According to at least one strategist, a move by the Federal Reserve away from its current ultra-accommodative policy tilt could be an incoming catalyst for another move higher in cyclical sectors.
“You really have to have your head on a swivel because for the first part of this year, owning interest rate-sensitive cyclical sectors, financials and others was a very good place to be,” Andrew Ries, chief investment officer at 6 Meridian, told Yahoo Finance on Tuesday. “And then that turned over the summer.”
“I think going forward, it’s likely that the Fed makes it clear that rates at this level, or this level of accommodation, probably isn’t necessary,” he added. “I think you also have some issues with regards to … what’s going on in Congress with some of the stimulus packages, the infrastructure bill. So all of those are going to impact probably the trajectory of interest rates. And if rates move up … moving up a little bit probably provides a tailwind for those cyclical sectors, the financial stocks, and probably a little bit of a headwind for the tech that’s had the big run-up.”
Video: Stocks hover near record highs (Yahoo! Finance)
11:02 a.m. ET: Airbnb shares jump amid rebound in travel stocks
Shares of Airbnb (ABNB) gained more than 8% at session highs on Tuesday, marking the stock’s biggest gain in five months, amid a broader rebound in travel and leisure stocks this week. The home-sharing company separately also announced it would be helping to provide temporary housing to 20,000 refugees from Afghanistan, with funding for the program coming in part from its non-profit arm Airbnb.org and CEO Brian Chesky.
Shares of airlines including Southwest (LUV), United Airlines (UAL) and Delta (DAL) were each also higher on the day, boosted by optimism over the economic reopening following the full FDA approval of Pfizer and BioNTech’s COVID-19 vaccine.
10:06 a.m. ET: New home sales rose in July for the first time in four months
New home sales rose in July, Commerce Department data showed on Tuesday, suggesting some firming in housing market activity even amid rising prices and low inventory levels.
New home sales increased 1.0% in July compared to June, bringing sales to a seasonally adjusted annual rate of 708,000. Consensus economists were looking for a rate of 697,000 homes. Sales in June were also upwardly revised to a seasonally adjusted annualized rate of 701,000, from the 676,000 previously reported.
9:45 a.m. ET: Peloton shares gain after company announces it will restart treadmill sales following recall
Fitness equipment company Peloton (PTON) announced Tuesday that its lower-priced connected treadmill will go on sale in the U.S., U.K. and Canada starting on August 30, marking the return of the product following a recall after a series of reported injuries related to the device earlier this year. The U.S. Consumer Product Safety Commission had called for the recall of both the Tread and higher-priced Tread+ in May.
The Tread resuming sales at the end of this month will cost $2,495
“We’ve worked hard to make sure the new Tread truly earns its spot in Members’ homes,” Peloton CEO and Co-founder John Foley said in a press release. “We’ll always continue to innovate our hardware, software and safety features to live up to our commitment to Member safety and to improving the full Member experience.”
9:31 a.m. ET: Stocks open higher, Nasdaq outperforms
The three major indexes extended gains Tuesday morning, building on record levels from the start of the week. The Nasdaq set a fresh intraday record, and the S&P 500 also hovered near its all-time high.
The risk rally extended to oil, and West Texas intermediate crude oil futures were on track to post a back-to-back session of gains. Treasury yields rose across the curve, and the benchmark 10-year yield added more than 2 basis points to hover above 1.27%.
7:30 a.m. ET Tuesday: Stock futures hold onto overnight advances
Here’s where markets were trading Tuesday morning:
S&P 500 futures (ES=F): +8.5 points (+0.19%) at 4,484.00
Dow futures (YM=F): +57.00 points (+0.16%) to 35,338.00
Nasdaq futures (NQ=F): +43.75 points (+0.29%) to 15,348.25
Crude (CL=F): +$1.19 (+1.81%) to $66.83 a barrel
Gold (GC=F): +$0.70 (+0.04%) to $1,807.00 per ounce
10-year Treasury (^TNX): +1 bps to yield 1.265%
6:15 p.m. ET Monday: Stock futures extend gains
Here’s where markets were trading Monday evening:
S&P 500 futures (ES=F): +5 points (+0.11%) at 4,480.50
Dow futures (YM=F): +43.00 points (+0.12%) to 35,324.00
Nasdaq futures (NQ=F): +20 points (+0.13%) to 15,324.50
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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