Stocks rose on Tuesday as traders pored over a solid batch of corporate earnings and looked for more clues on further U.S. fiscal stimulus.
The Dow Jones Industrial Average traded 283 points higher, or 1.2%. The S&P 500 climbed 0.6%. The Nasdaq Composite hit an intraday record before trading 0.3% lower.
Dow-member IBM gained 2% after the company reported better-than-expected second-quarter earnings. Notably, IBM improved gross margins in three of its five units in the past quarter.
Coca-Cola — another Dow component — said its profit fell 33% in the second quarter, but the company expressed optimism on demand as lockdown measures associated with the coronavirus were lifted. Shares rose 3.4%.
Thus far, 58 S&P 500 companies have reported calendar second-quarter earnings and 81% of them have beaten analyst expectations, according to data from Nick Raich of The Earnings Scout. To be sure, Raich pointed out the so-called blended S&P 500 earnings growth estimates — which takes into account the companies that have reported and the forecast for those that haven’t — is still showing a drop of 43.61% year over year.
Traders also added positions in beaten-down value names while growth stocks such as Facebook, Amazon and Netflix struggled. The iShares Edge MSCI USA Value Factor ETF (VLUE) jumped 1.1% while its momentum counterpart (MTUM) dipped 0.4%.
JPMorgan Chase, Citigroup and Bank of America were all up more than 1%. Airline stocks such as Delta, United and Southwest were up more than 2% each.
Sentiment was also lifted Tuesday after the European Commission, the European Union’s executive arm, agreed to a 750 billion euro stimulus package. The stimulus is designed to help countries and sectors in the region most affected by the coronavirus pandemic.
In the U.S., investors are monitoring the talks in Washington on the next coronavirus relief bill. Lawmakers face pressure to pass legislation before the end of the month, when the $600 per week federal unemployment insurance benefit is set to expire.
“I believe the stock market would benefit from news of a stimulus package coming to fruition,” Kristina Hooper, Invesco’s chief global market strategist, said in a note. “In times like this, despite a massive and rising budget deficit for the US, I believe big government is likely to be good news for the stock market.”
To be sure, investors appeared to hedge their positions by adding to their gold exposure. Gold futures rose 1.1% to $1,837 per ounce.
Tuesday’s moves came after a strong performance in technology shares that pushed the S&P 500 back into positive territory for 2020. The market also cheered a slew of positive news on the vaccine front. Pfizer and BioNTech reported early positive data on a joint coronavirus vaccine. Meanwhile, another candidate from Oxford University and AstraZeneca showed a positive immune response in an early trial.
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