Both the Dow Jones Industrial Average and the S&P 500 set new all-time highs on Tuesday, while the Nasdaq turned positive for the year, as investors put aside any concerns they might have of Great Britain leaving the European Union.
Akane Otani and Christopher Whittall of The Wall Street Journal had the news:
The rebound of the tech-heavy Nasdaq, combined with the broader market milestones, was an encouraging sign to analysts who had worried about the durability of stock-market gains built on relatively safe trades.
After outpacing other major indexes for the past four years, the Nasdaq has lagged its peers in 2016, as investors piled into high-dividend sectors like utilities while pulling out of shares of tech and health-care companies. Investors tend to turn to the former, considered bond proxies, when they are uncertain about economic growth.
“As the environment looks less scary, it makes sense to go after what was perceived as being these riskier, growth-oriented stocks,” said Karyn Cavanaugh, senior market strategist at Voya Investment Management. “Once people think there’s a little less risk, they’ll go pay for these growth stocks.”
On Tuesday, the Dow industrials rose 121 points, or 0.7%, to 18348 to climb past its previous closing record of 18312.39 set May 19, 2015. The blue-chip index hit six records last year, 38 in 2014 and 52 in 2013, after five years without one.
Rodrigo Campos of Reuters noted that cyclical stocks boosted the market:
Cyclical sectors like technology, materials and energy posted the largest gains on the S&P, backed by the view that the U.S. economy, despite a slow start to the year, is on solid footing.
Cyclicals are seen taking the lead in stocks for the rest of the year after utilities, telecoms and consumer staples led the way in the first half.
“We believe earnings in the U.S. and GDP growth bottomed in the first quarter. If that is the case, stocks should continue on at least another 5-percent gain from here this year,” said Paul Zemsky, chief investment officer, Multi-Asset Strategies and Solutions at Voya Investment Management in New York.
Earnings of S&P 500 companies are estimated to have fallen 5 percent in the second quarter, matching the drop in the first three months of the year, but a typical number of profit beats would leave the first quarter as the bottom of the earnings contraction.
Shreya Agarwal of Forbes wrote that oil prices also rose on Tuesday:
Energy, financials, and materials stocks led the day’s gains, while safety plays like utilities and consumer staples lagged. The 10-year Treasury yield rose to 1.52%, its highest level in two weeks as bond prices fell.
Oil prices surged 4.2% to $46.6 a barrel on expectations that U.S. crude stockpiles would show an eighth straight week of declines in trade data due out Wednesday.
Amazon surged briefly to a record high Tuesday morning as shoppers scoured its ‘Prime Day’ sales, but the shares surrendered those levels amid reports that some customers experienced trouble checking out on the dominant e-commerce site.
Automaker Tesla Motors TSLA -0.02% is reportedly being scrutinized by the SEC over a potential lack of disclosure surrounding a fatal May crash involving its autonomous driving technology. Shares of Tesla posted narrow losses Tuesday.
