Stocks dropped Tuesday after hitting fresh record highs earlier in the session, as traders’ hopes for a larger round of direct checks to consumers faded.
The three major indices each touched record levels but pared some gains mid-morning, and then turned negative. The turnaround came after Senate Majority Leader Mitch McConnell blocked motions by Democratic lawmakers to try and quickly advance a measure to increase stimulus payments to $2,000 from $600 for most Americans. McConnell also suggested the chamber would only consider the larger payments alongside other demands President Donald Trump had made, including investigating election security and removing liability shields for social media companies. Neither, however, are likely to gain traction with Democratic lawmakers.
Late Monday, the U.S. House of Representatives had voted to pass a bill increasing the stimulus checks to $2,000 from $600, as Trump had demanded last week. Many Republican Senators, however, had objected to larger stimulus payments during negotiations over the past couple months.
Still, Congress’s $900 billion package – which includes the $600 stimulus payments, replenished funding for loans through the Paycheck Protection Program, enhanced unemployment benefits and funds for vaccine distribution, among other measures – was signed into law late Sunday.
And despite Tuesday’s intraday dip, U.S. equities over the past few days had been benefiting from the seasonal period deemed the “Santa Claus Rally,” which extends over the final five trading days of the year and into the first two sessions of the new year. Over the past 50 years, stocks have ended this period higher 77.9% of the time, and with an average gain of 1.33% for one of the best seven-day periods of the year, according to LPL Financial.
The three major indices are also set to post strong returns this year, after rallying strongly off of their lows in March and flipping from bear to bull market with record velocity. As of Monday’s close, the S&P 500 was heading toward a 15.6% rise in 2020, the Dow for a 6.5% advance, and the Nasdaq for a staggering 44% jump as Big Tech and software stocks outperformed for much of the year.
As more businesses reopen and a semblance of pre-pandemic life returns in 2021, some strategists are looking for more of a rotation into the “reopening” and “epicenter” stocks hardest hit earlier this year, as these companies begin to recover.
“We think the rotation trade is still in play and so when we look back and take stock of 2020, as we come to the end of the year energy and financials are really still the laggards. So we think there’s some room for them to catch up, particularly as we get to reopening,” Rob Haworth, U.S. Bank Wealth Management senior investment strategist, told Yahoo Finance. “In the long term, innovation and growth still remain really important, which is why we say for a secular trade, for the long-term, still look on dips to pick up technology, health care, e-commerce sorts of names, but in the short-term as we get to reopening there’s certainly some room for earnings and revenue to catch up for these companies that have been so hard-hit in 2020.”
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11:00 a.m. ET: Stocks pare gains, Nasdaq turns negative
Here were the main moves in markets, as of 11:01 a.m. ET:
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S&P 500 (^GSPC): 3,739.74, up 4.38 points or 0.12%
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Dow (^DJI): 30,449.94, up 45.97 points or 0.15%
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Nasdaq (^IXIC): 12,871.27, down 28.15 points or 0.22%
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Crude (CL=F): +$0.63 (+1.32%) to $48.25 a barrel
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Gold (GC=F): +$4.50 (+0.24%) to $1,884.90 per ounce
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10-year Treasury (^TNX): +0.2 bps to yield 0.935%
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10:42 a.m. ET: Apple shares touch record intraday high, setting it up for the strongest 2020 gains of the FAANG stocks
Apple (AAPL) shares rallied as much as 1.5% on Tuesday to a record intraday high, as traders added to bets on the iPhone-maker’s prospects in the new year.
Apple’s year-to-date gain propelled to about 87%, pulling strongly ahead of Amazon’s 79% year-to-date advance, and Netflix’s 63% advance. Other Big Tech stocks were also poised for strong gains: Facebook was set for a 36% rise, and Alphabet headed toward a 33% gain for the year-to-date through intraday trading on Tuesday. That compares to an about 15.7% year-to-date rise for the S&P 500.
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9:30 a.m. ET: Stocks open higher, heading toward a third straight day of gains
Here were the main moves in markets, ass of 9:30 a.m. ET:
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S&P 500 (^GSPC): 3,754.48, up 19.12 points or 0.51%
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Dow (^DJI): 30,569.17, up 165.2 points or 0.54%
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Nasdaq (^IXIC): 12,967.62, up 68.2 points or 0.54%
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Crude (CL=F): +$0.60 (+1.26%) to $48.22 a barrel
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Gold (GC=F): +$3.80 (+0.2%) to $1,884.20 per ounce
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10-year Treasury (^TNX): +1.2 bps to yield 0.945%
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9:00 a.m. ET: U.S. home-price growth accelerates by the most in six years in October
Home prices in the U.S. surged by the most since 2014 in October, underscoring the ongoing strength of the housing market this year.
The S&P CoreLogic Case-Shiller 20-city home price composite index jumped by 1.61% in October over September, far exceeding estimates for a 1.00% rise, according to Bloomberg data. Over last year, the index surged 7.95%, or a full percentage point faster than anticipated.
The jump in home prices has come as low mortgage rates, tight inventory and demand for new work-from-home environments has buoyed the housing market.
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8:46 a.m. ET: Populous cities and service industries will ‘largely return to normal’ next year as virus fears fade: Goldman Sachs
Goldman Sachs economists said in a new note Tuesday they expect that highly populated cities and high-risk service industries will rebound strongly in 2021 even after suffering some of the biggest losses during the pandemic.
“We expect the virus fears that have kept the densest cities and the highest-risk consumer services deeply depressed to fade enough next year for economic life to largely return to normal,” the economists led by Jan Hatzius said in a note. “To make this prediction concrete, we consider employment in the leisure and hospitality sector in the New York metropolitan area, which collapsed by nearly two-thirds in April and has leveled off at just 63% of the pre-pandemic level.”
“By the end of 2021, we expect it to return to at least 90% of its previous level,” they added.
To justify their outlook, the economists said they estimated that about one-quarter of the U.S. population is already immune to COVID-19 due to prior infection. They assume half of the population will. be vaccinated by April, and three-quarters by year-end.
“There is some overlap between these two sources of immunity, but in combination they should be enough for the US to reach herd immunity around mid-year,” they wrote. “In the months that follow, we expect consumer activities such as dining, travel, and entertainment to return to roughly normal levels.”
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7:13 a.m. ET Tuesday: Stock futures extend gains
Here were the main moves in markets, as of 7:13 a.m. ET: Tuesday:
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S&P 500 futures (ES=F): 3,744.75, up 17.25 points or 0.46%
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Dow futures (YM=F): 30,445.00, up 140 points or 0.46%
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Nasdaq futures (NQ=F): 12,833.75, up 51.00 points or 0.4%
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Crude (CL=F): +$0.64 (+1.34%) to $48.26 a barrel
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Gold (GC=F): +$2.30 (+0.12%) to $1,882.70 per ounce
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10-year Treasury (^TNX): +0.8 bps to yield 0.941%
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6:02 p.m. ET Monday: Stock futures tick higher as overnight session begins
Here were the main moves in markets as the overnight session kicked off Monday evening:
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S&P 500 futures (ES=F): 3,730.75, up 3.25 points or 0.09%
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Dow futures (YM=F): 30,317.00, up 12 points or 0.04%
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Nasdaq futures (NQ=F): 12,844.5, up 11.75 points or 0.09%
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