S&P 500 in U-Turn as Tech Moves Deeper Into Red Amid Stimulus Stalemate
By Yasin Ebrahim
Investing.com – The S&P gave up gains on Tuesday, as a plunge in tech offset a climb in sectors tied to the economy in the wake of souring optimism over hopes of further fiscal stimulus.
The Dow Jones Industrial Average rose 0.05%, or 14 points. The S&P 500 fell 0.37%, while the Nasdaq Composite fell 1.12%.
In an interview with Fox News, Senate Majority Leader Mitch McConnell confirmed that talks between the Democrats and the White House were at "a stalemate," souring investor optimism that lawmakers will agree a new round of fiscal stimulus sooner rather than later.
Industrials pared gains on the news, as investors rein in bets on travel stocks, with the airlines, in particular, unwinding their gains for the day.
American Airlines (NASDAQ:AAL), United Airlines (NASDAQ:UAL) and Delta Air Lines (NYSE:DAL) gave up gains to turn negative.
Boeing (NYSE:BA) was up just 1%, after shrugging off earlier data showing that the pace of order cancellations last month outweighed the pace of new orders its customers continue to pull orders for its much-maligned 737 MAX jets.
Tech's move deeper into the red also exacerbated the downside in the broader market, paced by a decline in the so-called fab 5 companies.
Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOGL), Apple (NASDAQ:AAPL), Amazon.com (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), which account for about 25% of S&P 500, were in the red.
On the vaccine front, Russia became the first country to approve a Covid-19 vaccine, which Russian President Vladimir Putin said had already been given to his daughter.
But while many health professionals have raised questions over the safety and efficacy of the Russian-dubbed "Sputnik-V" vaccine, which went into clinical trials less than two months ago on June 17, the news helped lift investor optimism that a cure could be found sooner rather than later.
Against the backdrop of rising optimism over a potential vaccine, sectors tied to the economy such as financials and industrials advanced.
Financials held onto some gains, thanks to a jump in banks following a move higher in bond yields.
JPMorgan (NYSE:JPM) was up 4%, while Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) were up more than 1%.
Higher interest rates are seen as a boon for banks, boosting net interest margin – the difference between the interest income generated by banks and the amount of interest paid out to their depositors.
In earnings news, Novavax (NASDAQ:NVAX), which is in the midst of developing a potential coronavirus vaccine, fell 16% as the company's announcement that three contracts for its potential coronavirus treatment were not exclusive offset better-than-expected quarterly results.
Canada Goose (NYSE:GOOS) fell 4% after the retailer's gloomy guidance offset quarterly results that were not as bad as feared.
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