U.S. stock indexes headed higher late-morning Tuesday, with the Nasdaq Composite up for an eighth straight session, helped by improving economic data, after an overnight scare over trade relations with China.
President Trump tweeted that the U.S. – China traded deal signed in January was “intact” after his trade adviser, Peter Navarro, had earlier suggested that it was “over” in a television interview though he subsequently claimed his comment was taken out of context.
How are benchmarks performing?
The Dow Jones Industrial Average was up 130 points, or 0.5%, at about 26,155, supported by gains in Apple, JPMorgan Chase & Co., and Goldman Sachs; the S&P 500 index gained 20 points, or 0.7%, at around 3,138; while the Nasdaq Composite Index advanced 94 points, or 0.9%, at 10,150, trading near an intraday high at 10,166.47.
On Monday, the Dow advanced 153.50 points, or 0.6%, to end at 26,024.96. The S&P 500 rose 20.12 points, or 0.7%, to finish at 3,117.86, while the Nasdaq picked up 110.35 points, or 1.1%, closing at a record high of 10,056.47, while booking its seventh day in a row of gains and clinching its longest win streak since Dec. 26, 2019, according to Dow Jones Market Data.
What’s driving the market?
Early signs of economic recovery have driven U.S. stock prices higher in recent weeks, as business activity resumes after the lockdowns imposed to combat the coronavirus pandemic, but the sensitivity of the market to China-U.S. trade developments and the concentration of technology-related companies propelling the market higher is drawing increased attention on Wall Street.
In U.S. economic data, IHS Markit’s preliminary, composite purchasing manager’s index rose to 46.8 in June from 37 in May, highlighting a nascent economic recovery. The data showed the services sector index rose to 46.7 in June from 36.9 in May, and the manufacturing index recovered to 49.6, compared with 39.8. While the indexes are still below the 50 level, suggesting a contraction, they are steadily improving.
Similar data showed an improvement in the eurozone. The purchasing managers composite index for the eurozone–a measure of activity in the manufacturing and services sectors–rose to 47.5 in June from 31.9 in May to reach its highest level since February, the month before lockdowns began in Europe.
Meanwhile, new U.S. new home sales increased 16.6% in May to 676,000 annual rate, compared with estimates for a gain 632,000.
“Risk appetite is in the driver seat after global PMI data showed the economic comeback is well underway and mostly topping expectations,” wrote Edward Moya, senior market analyst at Oanda.
“US investors got the best reading possible, PMI data strongly rebounded, but didn’t outperform like Europe, calming any thoughts that maybe fiscal and monetary authorities may not keep the stimulates floodgates open,” he wrote in a Tuesday research note.
Earlier markets got a jolt of late-night volatility after Trump administration trade adviser, Peter Navarro, in a Monday evening interview on Fox News, said the China trade deal was “over”, citing unnamed intelligence officials that allegedly point to a Wuhan laboratory as the source of the COVID-19 pandemic.
“Here’s the turning point,” Navarro told Fox host Martha MacCallum. “They came here on January 15th to sign that trade deal, and that was a full two months after they knew the virus was out and about,” he said.
Fox’s MacCallum asked: “The president…he obviously really wanted to hang onto this trade deal, as much as possible, he wanted them to make good on the promises, because there had been progress made on that trade deal. But given everything that’s happened and all the things you just listed, is that over?” Navarro replied, “It’s over, yeah”.
Minutes later, the adviser said that his comments were “taken wildly out of context.” They had nothing at all to do with the phase-one trade deal, which continues in place, he told the Wall Street Journal. “I was simply speaking to the lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world,” he was quoted as saying.
Trump also said via Twitter Monday night that the China trade was “fully intact.”
“Hopefully they will live up to the terms of the agreement!” he wrote.
The Trump administration has long blamed China of mishandling the COVID-19 outbreak.
U.S. stock futures fell, along with Chinese equities and the yuan in Tuesday Asian overnight trade, underscoring the uncertainty and fragility of the Sino-American relationship.
“It appears this administration is ever so confused as the President says one thing and [his] trade advisor says another,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities, in a daily research note.
“We believe, these type’s of uncertainties could lead to another round of unsettled markets in spite of the Fed’s printing presses working at full speed,” he said referring to the Federal Reserve efforts to stimulate financial markets in the throes of the COVID-19 pandemic.
Meanwhile, the The Nasdaq Composite’s advantage over the Dow and S&P 500 is the biggest since 1983, while the divergence between the S&P 500 and the Dow is widest since 2002, according to Dow Jones Market Data, highlighting the strength of a handful of stocks, including Apple, Microsoft, Facebook, Amazon.com, and Google-parent Alphabet.
Which stocks are in focus?
- American Airlines Inc. priced an offering of 74.1 million shares at $13.50 a share on Tuesday, moving to raise cash and bolster its liquidity position during the coronavirus pandemic. The airline also priced an offering of $1 billion of convertible bonds that mature in 2025 at 6.50%. Shares were off 7% early Tuesday.
- Shares of Palatin Technologies Inc. said it would test one of its investigational drugs as a treatment for COVID-19. Shares surged nearly 25%.
- Apple Inc. shares headed 1.8% higher for a fresh record on Tuesday after its World Wide Developers Conference.
- Starbucks Corp. said Tuesday that it will launch its summer menu in the U.S., which will include the Impossible Breakfast Sandwich. Shares gained 0.2%.
- Greenwich LifeSciences set terms for its planned initial public offering on Tuesday, with plans to offer 1 million share priced at $7.50 to $8.50 a pop.
How are other assets performing?
West Texas Intermediate U.S. crude rose 27 cents, or 0.7%, at $41 a barrel on the New York Mercantile Exchange. In precious metals, gold futures for August gained $15.20, or 0.9%, at $1,781.70 an ounce. trading around its highest level since 2012.
The 10-year Treasury note yield rose 1.2 basis points to 0.71%. Bond prices move inversely to yields.
The greenback was down 0.6% against basket of its major rivals, based on trading in the ICE U.S. Dollar Index.
In global equities, the Stoxx Europe 600 index traded 0.9% higher, while the also advanced 0.9%.
In Asian markets, China’s benchmark CSI 300 index gained 0.4%, the Japanese Nikkei picked up 0.5% lower, Hong Kong’s Hang Seng gained 1.6%, and South Korea’s Kospi index inched up 0.2%.