U.S. stocks rose higher Tuesday as the strength of banking and industrials outweighed travel names held back by Covid fears.
The Dow Jones Industrial Average rose 142 points, or 0.4%, nearly halfway through the trading day after briefly falling more than 100 points at the start of the session. The S&P 500 was up 0.4% while the Nasdaq Composite was up 0.1%. The Dow is about 0.5% from a record.
US 10-year Treasury yields stabilized on Tuesday after falling back to near 5-month lows on Monday. As yields bounced back to the unchanged level from their midday decline, stocks rose slightly.
The Dow was boosted by stocks linked to the economic recovery such as banks, Caterpillar and 3M. Health stocks like Amgen and Johnson & Johnson also outperformed.
However, stocks of companies that would be hardest hit by possible new health restrictions, including airlines and cruise lines, fell on Tuesday, limiting the market’s upside. .
The spread of the delta coronavirus variant continued to cloud the economic outlook. The seven-day average of daily coronavirus cases in the US hit 72,790 on Friday, beating its peak last summer when the nation did not have an approved Covid-19 vaccine, according to data compiled by the Centers for Disease Control and Prevention .
On the positive side, however, the US has hit the 70% Covid vaccine milestone, according to the CDC.
“The Delta variant of the virus is now spreading rapidly in the US and a modest decline in activity cannot be ruled out,” Solita Marcelli, CIO Americas at UBS, said in a press release. “But any possible slowdown should be dampened a bit.”
Oil inventories also rose, although the price of West Texas Intermediate crude fell to around $ 70 a barrel. Adam Karpf, managing director at CIBC Private Wealth with a focus on energy, said the surge in oil was more due to trade patterns than the delta variatn, which was a major drag on global growth.
“Provided this is kept under control … we had a strong crude oil market and a strong energy industry for several months and weeks, and that is a breather,” said Karpf.
Traders on the floor of the New York Stock Exchange
Source: NYSE
Meanwhile, earnings season continues for the second quarter, with Under Armor stock rising nearly 7% after the company beat sales and earnings estimates. However, Clorox stock fell 10% after a disappointing report.
Simon Property shares rose more than 2% after the mall’s owner said sales had returned to pre-pandemic levels, 80% more than a year ago. In addition, a relatively high utilization was reported.
By Friday, 88% of the S&P 500 companies had reported a positive earnings surprise for the second quarter, the highest percentage since FactSet began collecting this metric in 2008.
“Rising earnings support valuation,” said Terry Sandven, chief equity strategist at US bank Wealth Management, in a press release. “Rising revenues and profits, generally subdued inflation, relatively low interest rates, ongoing monetary and fiscal stimulus and the medical advancement of COVID-19 support our outlook for rising US stocks in the second half of 2021.”
Investors are closely monitoring progress in Washington as lawmakers work towards a bipartisan infrastructure bill that would provide $ 550 billion for U.S. infrastructure. Senate majority leader Chuck Schumer wants to get the 2,702-page bill through the Chamber before a planned one-month break from August 9th.
