U.S. stock indexes clambered toward record-high territory Tuesday morning, as upbeat economic reports helped to feed the buying momentum on Wall Street. The climb for stocks comes even as investors enter what is expected to be a seasonally challenging month for equities, following the best August returns in more than 30 years.
How are stock benchmarks performing?
The Dow Jones Industrial Average (DJIA) was up 40 points at 28,467, a 0.1% rise, reversing an opening slide; the S&P 500 index (SPX) added 9 points to reach 3,510, a gain of 0.3%, after touching a all-time intraday high at 3,515.91; while the Nasdaq Composite Index (COMP) advanced 104 points at 11,876, a rise of 0.9%, touching a record intraday high at 11,915.13.
On Monday, the Dow shed 223.82 points, or 0.8%, to end at 28,430.05. The S&P 500 (SPX) fell 7.70 points, or 0.2%, ending at 3,500.31. The Nasdaq rose 79.82 points, 0.7%, to end at a record 11,775.46, its 41st record close of 2020.
The S&P 500 clinched its best August return since 1986 and the Dow its best return for that month since 1984, while the Nasdaq recorded its strongest August since 2000
What’s driving the market?
The winners of the past few months are looking to be the winners of the next one, as buying of large-capitalization growth and technology stocks, a major theme of trading since the coronavirus pandemic took hold in March, continued to start trade in September.
Gains in Apple, Walmart, Zoom Video, Amazon.com and Facebook Inc. underscored that theme early Tuesday, with shares in those popular plays carving out fresh gains in the new month.
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Stock gains firmed after a wobbly start at Tuesday’s open after a report on American manufacturers for August showed a fourth straight monthly rise. The Institute for Supply Management said its manufacturing index rose to 56% in August from 54.2% in July. Readings over 50% indicate growth. Economists surveyed by MarketWatch had forecast the index to total 54.9%.
The report followed a comparable reading from IHS Markit, which showed that manufacturing purchasing managers’ index rose to 53.1 in a final reading for August, down slightly from the previously released ‘flash’ estimate of 53.6, but up from 50.9 at the start of the third quarter to post the fastest expansion since January 2019.
Still, investors are anxious going into the new month as they wrestle with stock valuations elevated against a backdrop of a Federal Reserve that has implied that it will keep rates ultra-low even if inflation pressures begin to percolate.
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“Technology has regained leadership with broad-based movement back to new highs, and Growth dominating, but bifurcation is growing larger,” Mark Newton, technical analyst at Newton Advisors, said.
He cautioned that breadth, or the number of stocks rising versus those declining, is offering a cautious sign. “Breadth has tailed off ‘big-time’ with more than 5 occurrences in the last few weeks of more decliners than advancing issues,” he said.
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The Fed’s new stance on inflation targeting is still being digested on Wall Street and has so far resulted in more pressure on the U.S. dollar, a factor that may also support further buying in stocks that boast large overseas businesses.
Meanwhile, overnight the eurozone IHS manufacturing purchasing managers index pointed to improving conditions in August, as the region’s recovery from the coronavirus pandemic continued, while in China the Caixin purchasing managers index, which is weighted toward small, private manufacturers, rose to 53.1 in August from 52.8 in July.
Among Fed speakers, Fed Gov. Lael Brainard is slated to speak at 1 p.m.
Which stocks are in focus?
- Shares of Tesla Inc. (TSLA) were down 2.1% on Tuesday after it announced a $5 billion offering, which deflated its momentum after its stock split on Monday.
- Zoom Video Communications Inc. (ZM) shares soared 36% early Monday after the company made as much money in May, June and July as it did in all of 2019, beating even the outsize expectations of Wall Street and sending its stock, its recent quarterly results out on Monday revealed.
- DocuSign (DOCU) which enables electronic signatures on legal documents and is due to report its own results after Thursday’s closing bell, was seeing its shares gain more than 18% as the category of software-as-aservice companies benefit from Zoom’s powerful quarterly results.
- Shares of Eastman Kodak Co. (KODK) were up 30% Tuesday after the company disclosed that D.E. Shaw & Co. has taken a 5.2% stake in the company.
How are other assets trading?
In Asia, China’s CSI 300 (XX:000300) rose 0.5% and Hong Kong’s Hang Seng (HK:HSI) finished virtually unchanged but in positive territory on the session.
The Stoxx Europe 600 (XX:SXXP) traded 0.1% lower, while U.K.’s FTSE 100 benchmark (FR:UKX) tumbled 1.5% so far on Tuesday.
The yield on the 10-year Treasury note (BX:TMUBMUSD10Y) added 1.4 basis points to 0.72%, after adding 15.9 basis points during August. Bond prices move inversely to yields.
Gold (GCZ20) rise $4.70, or 0.2%, to $1,983.30 an ounce. West Texas Intermediate crude for October delivery (CL) traded 70 cents, or 1.6%, higher at $43.30 a barrel on the New York Mercantile Exchange.
The ICE U.S. Dollar Index (DXY) which tracks the currency versus a basket of six major rivals, fell 0.1% to extend its decline this year.
Video: Potential for US stimulus may push stocks to further highs: Strategist (CNBC)