Tuesday's early trade: Stimulus bets drive indexes higher

Darnell Taylor
October 21, 2020

Banks, industrial stocks and companies that rely on consumer spending helped lift the market, outweighing losses in technology and communications stocks.

European stocks closed broadly lower, and Asian markets ended mixed.

The breakout in Treasury yields is what stands out so far today and if this is a signal of the reflation trade starting to take its early steps, then there will be more risky consequences for the market to worry about. Procter & Gamble shares rose on the best organic sales growth since 2005.

Snap shares jumped 24% in off-hours trading after its revenue grew by more than half, significantly exceeding analysts' expectations.

USA equities rallied on Tuesday, fed by investor optimism that a deal would be reached in Washington to provide new relief measures and help the US economy withstand the impact of the coronavirus pandemic.

Oct 19 (Reuters) - Wall Street's main indexes slipped on Monday as losses in tech-related heavyweights Facebook and Amazon eclipsed optimism on a coronavirus relief deal before the November 3 presidential election.

"The stimulus package seems to be the major fixation for investors right now - the idea of Republicans and Democrats agreeing on the next payments going forward", said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

Tech shares shook off the US Justice Department's decision to sue Google for allegedly abusing its power. The Dow Jones Industrial Average of big blue chips dropped 1.4 per cent to 28,195.42.

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The Nasdaq composite added 37.61 points, or 0.3%, to 11,516.49. The Russell 2000 gave up 20.18 points, or 1.2%, to 1,613.63.

Stocks have been mostly pushing higher this month after giving back some of their big gains this year in a sudden September swoon. Pelosi downplayed the importance of an end-of-Tuesday deadline she had set to strike an agreement and added that she would continue to discuss, saying lawmakers would have to come to a deal and write a bill before the end of the week in order to have a legistlation ready before Election Day. "We can hear as much as we want from Pelosi and Mnuchin about progressing talks, but some senators have said simply that they won't support any package". Gold ticked 0.3% higher.

Regardless of staunch opposition to stimulus from Republican leaders, Jeffrey Halley of Oanda said, "the one lesson we can take is that the USA fiscal stimulus package remains the only thing financial markets are concentrating on, to the exclusion of everything else".

ING has lifted its China GDP forecast to 1.7% from 0.7% for the whole of 2020, and to 7.0% from 3.5% for 2021, citing a stronger-than-expected domestic recovery.

Market sentiment was also dented as coronavirus cases continued to surge. The benchmark S&P 500 has notched a gain in each of the past three weeks. But they're forecasting the decline to moderate from the almost 32% plunge from the spring as the economy has shown signs of improvement.

U.S. Treasury prices eased further, as the benchmark 10-year Treasury yield advanced to 0.795% from 0.760% Monday.

The S&P index recorded 25 new 52-week highs and one new low, while the Nasdaq recorded 94 new highs and 22 new lows. France's CAC 40 rose 0.2%, Britain's FTSE 100 rose 0.4% and Germany's DAX slipped 0.4%.

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