By Mark DeCambre, MarketWatch
U.S. stock-indexes finished mostly higher Tuesday as investors snapped up beaten-down energy and financial stocks amid a slate of corporate earnings reports, including Coca-Cola and Lockheed Martin’s second-quarter results.
Market sentiment also was encouraged by the promise of additional U.S. fiscal stimulus, after the European Union forged a historic budget package intended to dampen the economic impact of the effects of the COVID-19 pandemic.
How did benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.59% added 159.53 points, or 0.6%, to end at 26,840.40, after hitting an intrasession peak at 27,025.38, powered by Chevron Corp . /zigman2/quotes/205871374/composite CVX +1.02% and Boeing Co. . The S&P 500 index /zigman2/quotes/210599714/realtime SPX -1.21% rose 5.46 points, or 0.2%, at 3,257.30, with the energy sector /zigman2/quotes/210600521/delayed XX:SP500.10 +0.19% rising 6.2% and the financial sector /zigman2/quotes/210600521/delayed XX:SP500.10 +0.19% up 1.9%, but the technology sector /zigman2/quotes/210600213/delayed XX:SP500.45 -2.44% capped gains in the broad-market index, off 1.1%, the worst performer among the benchmark’s 11 sectors.
Meanwhile, the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -2.45% closed 86.73 points, or 0.8%, lower at 10,680.36, ending solidly lower after hitting an intraday record at 10,839.93 near the open.
Despite the pullback, the S&P 500 marked its highest close since Feb. 21. The S&P 500 is 3.8% from its Feb. 19 closing high, while the Dow is off 9.2% from its Feb. 12 all-time closing peak.
What’s driving the market?
Investors staged a tepid rotation to other under-loved parts of the stock market on Tuesday, with buyers scooping up downtrodden shares in banks and oil-and-gas producers, which have been battered during the coronavirus pandemic.
The move come a day after the technology-laden Nasdaq Composite delivered its 28th record close of 2020, with Tuesday’s gains helping to lift the S&P 500 out of a range that it has been trading since early June, experts said.
“The S&P 500 is breaking out of trading range,” Crista Huff, founder of hedge fund Freedom Investment Partners, told MarketWatch. “We are beginning a bull run.” But “clearly we have some massive problems in the economy and there are so many people that are unemployed and 10 or 20 million aren’t going to have an easy time finding a new job,” she added.
Corporate earnings still look dire when considering the sharp hit many businesses have taken during the pandemic, although they are mostly better-than-feared.
“In the cyclical parts of the market, there was pessimism heading into earnings,” said Matt Stucky, equity portfolio manager at Northwestern Mutual Wealth Management, in an interview. But with growing optimism about potential coronavirus vaccines and therapeutics, as well as continuing fiscal and monetary stimulus, Stucky sees a case to be made for downtrodden stocks that have yet to join the Nasdaq at record levels.
While the staying power of the pandemic is unknown, he expects the Federal Reserve and other global central banks to keep their feet “all the way down to the accelerator for awhile, which will permeate into equity prices.”
Early Tuesday, the European Union reached an agreement on a €750 billion ($860 billion) coronavirus rescue fund after four days of intense negotiations among officials from the 27-nation bloc. The recovery package comprises €390 billion in grants and the remainder in loans as a part of a compromise with Denmark, Sweden, Austria and the Netherlands, which had been reluctant to push for a larger package of funds via grants. The leaders also agreed on a multiyear EU budget of over €1 trillion that will run from next year to 2027.
In the U.S., investors were awaiting developments on another fiscal stimulus plan by Congress as a $600 per-week federal unemployment package is set to expire at the end of the month.
The reports come as a number of corporations are reporting second-quarter results, including Coca-Cola Co . /zigman2/quotes/209159848/composite KO +0.08% , which presented results that were better than expected early Tuesday.
The action on Wall Street comes as the global tally for confirmed cases of the coronavirus that causes COVID-19 climbed to 14.8 million on Tuesday, according to data aggregated by Johns Hopkins University, and the death toll rose to 610,292. The U.S. has the world’s highest death toll at 141,426, according to data aggregated by Johns Hopkins University.
“Today, you’re seeing optimism around a potential vaccine and also around further economic stimulus,” said Mike Skillman, chief executive officer at Cadence Capital. “Cyclical industries have seen the most damage from the coronavirus, with revenue down 30-40%, and earnings down even more,” he said. “But there are a few data points, maybe not enough to draw a conclusion, but perhaps signs that we already have seen the bottom.”