Stocks rose on Tuesday as investors added exposure to some of the more cyclical names in the market while Big Tech underperformed.
The Dow Jones Industrial Average closed 556.79 points higher, or 2.1%, at 26,642.59. It was the 30-stock average’s best day since June 29 as well as its third straight daily gain. The S&P 500 climbed 1.3% to 3,197.52 while the Nasdaq Composite was up nearly 1% at 10,488.58.
Caterpillar was the best-performing Dow stock, rising more than 4%. Exxon Mobil and Chevron were up more than 3% each as well. Boeing closed 2.5% higher. At the S&P 500 sector level, energy jumped 3.6% while materials and industrials each gained more than 2%.
Sentiment also got a boost after Florida reported a daily coronavirus case increase that was below a seven-day average. California’s daily Covid case rate decreased slightly from Monday’s as well.
Big Tech — which has been a stalwart on Wall Street all year as investors bet these stocks will stay resilient during the coronavirus pandemic — lagged. Amazon and Netflix were down 0.6% and 0.1%, respectively. Alphabet rose 0.6% after being down for most of the day.
“I think this is the quarter that the underperforming sectors will mean revert higher because we have likely overdone that trade that has ignored everything cyclical,” said Art Hogan, chief market strategist at National Securities. “It’s going to be very difficult for us to take a look at Microsoft, Apple, or Amazon and try to confirm those rallies with something we learn from the second quarter.”
Shares of major tech companies were coming off a sharp reversal that negated a broader market rally in the previous session.
The Nasdaq Composite rose nearly 2% to a record before ending Monday’s session down more than 2%. Bespoke Investment Group also pointed out Monday marked the third time since 1985 that the Nasdaq hit an intraday record before ending a session down more than 1%.
“That turnaround yesterday, the pirouette where it went back down, you don’t just snap out of that in one day,” CNBC’s Jim Cramer said on “Squawk on the Street.” “There are too many people who bought at the top who are trying to figure out, ‘Lord get me back to even.’ Let this play out. We don’t even know which group is going to come to the fore here. Will it be the companies that do better because people think a vaccine is upon us? I can’t buy into that theory but that was the theory yesterday afternoon.”
Bank earnings kick off
JPMorgan Chase reported better-than-expected results for the second quarter on the back of a massive surge in trading revenue. Citigroup’s second-quarter earnings were also driven in part by a sharp uptick in trading revenue. JPMorgan shares closed 0.6% higher while Citigroup lost 3.9%.
Wells Fargo struggled, falling 4.6% after reporting a $2.4 billion loss and slashing its dividend to 10 cents per share from 51 cents per share.
“What’s so influential about the banks reporting early in the earnings season in times like these is we’re really counting on banks’ management team’s view on what’s going on,” Susan Schmidt, head of U.S. equities at Aviva Investors, told CNBC. “Banks are the foundation of our U.S. economy. They are there to provide loans to small businesses and to manage the retail consumers’ deposits.”
Goldman Sachs is slated to report earnings Wednesday morning.
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