U.S. stocks came from their highs on Tuesday, but big benchmarks were still on track for another gains session when the Federal Reserve began a two-day political meeting.
Nasdaq was a leader in the broader market as technology stocks continued to make up for lost ground during last week’s sales.
How do stock benchmarks work? The Dow Jones Industrial Average (DJIA) rose 79.39 points, or 0.3%, to 28,072.72, while the S&P 500 (SPX) rose 26.23 points, or 0.8%, to trade at 3,409.77. The Nasdaq Composite (COMP) rose 162.46 points, or 1.5%, to 11,219.11.
On Monday, the Dow rose 327.69 points, or 1.2%, to close at 27,993.33 after short trading above the 28,000 threshold. The S&P 500 added 42.57 points or 1.3% and finished at 3,383.54. The Nasdaq Composite climbed 203.11 points, or 1.7 percent, topping 11,056.65, returning from a routine that last week saw the tech-heavy index enter the correction range by falling more than 10 percent from a record high. .
What drives the market?
A pick-up of merger and acquisition activities in the technology sector helped stocks regain their footing after last week’s sale, which may have led investors to justify that valuation was not so stretched if companies like chipmaker Nvidia Corp.
(NVDA) was ready to make acquisitions, said Elliott Savage, portfolio manager for the YCG Enhanced Fund, in an interview. Nvidia said on Sunday that it had reached an agreement to buy Arm Holdings from SoftBank for $ 40 billion.
However, caution is in order, he said. A sharp increase in March pandemic stocks has been driven by a combination of improving the earnings base of certain technology-oriented companies capable of growing market shares, as well as by increased speculative interest.
While investors largely gave companies access to earnings in the second quarter, Q3 results are likely to be subject to tougher scrutiny, while political uncertainty surrounding the November presidential election could increase the potential for increased volatility, Savage said.
Investors were heard on Monday of positive news about a vaccine against COVID-19 from AstraZeneca (AZN) and BioNTech (BNTX) and kept an eye on Tuesday for a product launch of Apple Inc. (AAPL) as well as several IPOs.
“Each positive vaccine headline brings more clarity to the timing and potential success of vaccine delivery and highlights the light at the end of the tunnel for this pandemic and the economic devastation it has created in many industries,” said Michael Reynolds, an investment strategist at Glenmede Trust Co. ., in email comments.
The Federal Reserve began its political meeting on Tuesday, followed by a press conference and a political statement on Wednesday, while central bank decisions from the Bank of England and the Bank of Japan are given on Thursday.
The meeting of the Political Policy Committee for the Open Market for Open Markets would also be the first when the central bank introduced its new policy framework for average inflation targeting.
At his post-meeting press conference, Federal Reserve Chairman Jerome Powell is likely to be peppered with questions about how the Fed intends to measure maximum employment and average inflation, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities.
While the committee “will keep the policy as flexible as possible by keeping these aspects of the policy vague, the press will try to seek out Chairman Powell down to the details so that the deviations from the target can be quantified,” he said.
Investors are keeping an eye on Snowflake Inc., a cloud computing company set to be listed on the New York Stock Exchange this week and backed by Warren Buffett’s Berkshire Hathaway (BRK) (BRK) and Salesforce.com (CRM) On Monday, Snowflake raised the proposed price range for its initial public offering to $ 100 to $ 110, up from a previous $ 75 to $ 85. The company plans to offer 28 million shares to raise up to $ 3.08 billion.
Check: Snowflake IPO: 5 things to know about the Berkshire-backed company looking for record-breaking software offering
Apple Inc. (AAPL) keeps its first virtual only product unveiled, with Cupertino, California, technological behemoth unveiling its latest smartwatch, a debut that could potentially provide a new catalyst for shares in the popular company. The iPhone maker also released a new subscription-class subscription service. Apple shares rose 0.7%.
Analysts said a positive tone for equities was also helped by economic data from China, where retail sales grew in August for the first time in 2020. Sales grew 0.5% last year, according to China’s National Bureau of Statistics.
In U.S. economic data, the New York Fed’s Empire State Business Relations Index rose 13.3 points to 17 in September. Economists had expected a reading of 6, according to a study by Econoday. The gain reverses a drop of 14 points in August. US industrial production rose 0.4% in August after a revised 3.5% gain in July.
See: The IPO market is taking advantage of the busiest week since May 2019 – Uber’s IPO week – with 12 offers in print
Which stocks were in focus?
- Shares of Oracle Corp. (ORCL) rose 2.6% after The Wall Street Journal reported that the Trump administration reviewed the companies bidding to become the “strategic partner” for TikTok’s US operations, owned by Chinese ByteDance.
- BioNTech (BNTX) shares rose 0.3% after the pharmaceutical company said it would receive up to 375 million euros ($ 445.9 million) in funding from the German Federal Ministry of Education and Research to support the rapid development of a COVID -19 vaccine in collaboration with partner Pfizer Inc. (PFE) and Fosun Pharma.
- Shares of Charles Schwab Corp. (SCHW) fell 2.5% after the discount broker delivered a poor result in Q3.
- Nikola Corp. (NKLA) shares fell 6.3% after a report by the Securities and Exchange Commission looked at allegations made last week by short seller Hindenburg Research, which called the manufacturer of electric trucks a “complicated scam.” Nikola has denied the allegations.
- Bentley Systems Inc. set terms for its initial public offering with a pricing that estimated the company at up to $ 4.96 billion.
How do other markets trade?
The yield on the 10-year government note (BX: TMUBMUSD10Y) rose a single basis point to 0.679% as a positive tone for equities and other risky assets reduced demand for traditional ports as government bonds. Bond prices go upside down to interest rates.
The ICE US Dollar Index (DXY), which tracks greenback performance against its big rivals, was flat.
Gold futures (GCZ20) rose 0.2% to settle at $ 1,956.30 an ounce, a day after hitting an approx. two weeks high. The U.S. crude oil benchmark (CL) rose 1.9% when Hurricane Sally, a dangerous Category 2 storm, closed in on the Gulf Coast.
Global equities were rising, with the Stoxx Europe 600 Index (XX: SXXP) rising 0.7% while the UK benchmark FTSE 100 (FR: UKX) rose 1.3%. In Asia, Hong Kong’s Hang Seng Index (HK: HSI) rose 0.4% and the Shanghai Composite Index (CN: SHCOMP) rose 0.5%. Japan’s Nikkei (JP: NIK) fell 0.4%.
Video: Wall Street looks set to recover from last week’s downturn (CNBC)
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