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Nasdaq Hits Record High as Wall Street Rises on Signs of Recovery

Nasdaq Hits Record High as Wall Street Rises on Signs of Recovery
(Daniel Kaesler/Dreamstime)

Tuesday, 23 June 2020 04:13 PM

Wall Street's three major indexes closed higher on Tuesday as improving economic data and the prospect of more stimulus bolstered hopes of a swift recovery, while a jump in technology shares powered the Nasdaq to another record high.

While all the indexes pared gains late in the session to close below their peaks for the day, the Nasdaq managed to register its fifth record high close this month. Apple Inc provided the biggest boost followed by Amazon.com and Microsoft.

Data showed that the pace of contraction in the U.S. manufacturing and services sectors slowed in June as businesses reopened after lockdowns that started in mid-March.

Also, new home sales jumped 16.6% in May, blowing past estimates of a 2.9% rise.

"The cumulative effect of the economic data we've been seeing is helping to support the V-shaped rally we've had in stocks," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"It's reinforcing views that equities can continue to advance even though there's a fair amount of economic damage that's going to loiter for some time to come, such as elevated unemployment readings and the slow recovery in travel, leisure and entertainment industries."

Despite rising coronavirus cases, Luschini noted that the lack of appetite for further economic lockdowns among federal and state officials was likely cheering investors.

The mood may have been dampened a little by a New York Times report that European Union countries were prepared to block Americans from entering because the United States has failed to control the coronavirus pandemic.

But it helped that government officials were talking about further stimulus, Luschini added.

Then U.S. Treasury Secretary Steven Mnuchin said that the next stimulus bill will be focused on getting people back to work quickly and that he would consider a further delay of the tax filing deadline.

Earlier in the day White House economic adviser Lawrence Kudlow said tax rebates and direct mail checks are on the table in the next coronavirus relief bill.

The Dow Jones Industrial Average rose 131.14 points, or 0.5%, to 26,156.1, the S&P 500 gained 13.43 points, or 0.43%, to 3,131.29 and the Nasdaq Composite added 74.89 points, or 0.74%, to 10,131.37.

Seven of the 11 major sub-indexes were higher with consumer discretionary and technology posting the steepest gains. Industrials ended the day unchanged.

The defensive utilities, real estate and consumer staples sectors slipped as investors felt more comfortable taking riskier bets.

"Technology has taken on a bit of a defensive role as well but one that offers better growth potential than utilities or real estate," said Luschini.

It also helped that at least three brokerages raised their price targets for Apple's stock, and UBS raised its iPhone shipment estimates a day after the iPhone maker said it would use its own chips for Mac computers.

Earlier global equity markets had shown some relief from U.S. President Donald Trump's assurance that the Phase 1 trade agreement with China was "fully intact" after adviser Peter Navarro sparked confusion by saying the deal was over.

While U.S.-China tensions have been a cause for concern, monetary and fiscal support worth trillions of dollars has played a large part in powering gains in the benchmark S&P 500 which closed 7.5% below its Feb. 19 record high.

Nike Inc rose 2.4% as brokerages raised their price targets ahead of quarterly results on Thursday.

Spirit AeroSystems Holdings fell 13.3% after the company, which is Boeing Co's top supplier, said it was seeking relief from lenders as its finances were stretched by the COVID-19 pandemic and a 737 MAX production halt.

Advancing issues outnumbered declining ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.22-to-1 ratio favored advancers.

The S&P 500 posted 25 new 52-week highs and no new lows; the Nasdaq Composite recorded 142 new highs and eight new lows.

On U.S. exchanges 12.07 billion shares changed hands compared with the 13.29 billion average for the last 20 sessions. 

GLOBAL STOCKS

The dollar eased and global equity markets surged on Tuesday after reassurances on the U.S.-Sino trade deal and upbeat economic data from the United States and Europe brightened the prospect of a swift economic recovery.

The euro hit a one-week high as higher-risk currencies, including the Australian dollar, rose after U.S. officials reaffirmed the trade deal following remarks by White House trade adviser Peter Navarro, who said late Monday the pact was "over."

Beijing has actually stepped forward in a number of areas in a constructive way, Larry Kudlow, director of the national economic council, told Fox Business Network.

"The confirmation from the White House that the China trade deal remains in place gave a lot of confidence to the market," said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Also driving "risk-on" sentiment was data showing sales of new U.S. single-family homes increased more than expected in May and a slower-than-expected contraction of U.S. and European business activity last month.

IHS Markit's euro zone Flash Composite Purchasing Managers' Index, seen as a good gauge of economic health, recovered to 47.5 from May's 31.9, moving closer to the 50 mark separating growth from contraction. In April it was a record low 13.6.

The U.S. PMI reading and other IHS Markit indicator beat expectations, driving European bourses to close more than 1% higher, with Germany's DAX index topping 2%. Wirecard climbed 18.8% after the arrest of its former chief executive on suspicion of falsifying accounts.

"The PMIs overseas were very strong and broad. There's a lot of pent-up demand, there's a lot of cash and cash equivalents sloshing around looking for a home," Ghriskey said.

MSCI's gauge of stocks across the globe gained 0.90% , but remains 8% lower than its peak in February. MSCI's emerging market index rose 1.44%.

In Europe, the broad pan-regional STOXX 600 index closed up 1.3%.

The weaker dollar, a sign of increased risk appetite, lifted gold prices to their highest since October 2012 as investors eyed central bank monetary stimulus aimed at bolstering the recovery in the midst of still-rising coronavirus cases.

"The tsunami of stimulus coming in from everywhere is not only inflationary but also painting a weaker picture for the economy and making gold look attractive," said Edward Meir, analyst at ED&F Man Capital Markets.

The upbeat economic data and trade deal affirmation boosted longer-term U.S. Treasury yields, while the closely watched spread between 2- and 10-year yields, considered a barometer of economic expectations, inched up to 53 basis points.

Benchmark 10-year notes rose 1.1 basis points to yield 0.7135%.

Safe-haven German 10-year bond yields rose 3 basis points to -0.41%, moving further away from a near one-month low overnight after the trade remarks shocked markets.

The dollar index fell 0.34%, with the euro up 0.42% to $1.1305. The Japanese yen strengthened 0.32% versus the greenback at 106.55 per dollar.

Oil futures pulled back from highs last seen before the coronavirus pandemic slammed fuel demand worldwide. U.S. crude inventory figures are released late in the day and on Wednesday also gave traders pause.

Brent futures settled down 45 cents at $42.63 a barrel, while U.S. crude fell 36 cents to settle at $40.37 a barrel.

U.S. gold futures settled up 0.9% at $1,782 per ounce.

© 2020 Thomson/Reuters. All rights reserved.


   
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Wall Street's three major indexes closed higher on Tuesday as improving economic data and the prospect of more stimulus bolstered hopes of a swift recovery, while a jump in technology shares powered the Nasdaq to another record high.
wall street, stock, market, nasdaq
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2020-13-23
Tuesday, 23 June 2020 04:13 PM
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