Wall Street reversed course late Tuesday, with the S&P 500 and the Dow whipsawing to positive territory by the closing bell in a tug-of-war between stocks that thrived amid lockdowns and those that stand to benefit most from a reopening economy. Both the Nasdaq and Canada’s TSX ended lower, as tech stocks remained under pressure.
The S&P/TSX Composite Index closed down 86.65 points, or 0.47%, at 18,330.09, with gold and cannabis stocks - as well as Shopify - keeping the benchmark in the red to end the session. That was despite a rally in the financials sector after Bank of Montreal and Bank of Nova Scotia both beat Street expectations in reporting quarterly profits this morning. The financials sector was up 1% for the day, with BMO rallying 3% and Scotiabank 2.8%.
The materials sector lost 1.91% as gold prices slipped, and energy gained 0.91% as oil held near recent highs. Major movers in Toronto included Thomson Reuters, which reported stronger-than-expected fourth-quarter revenue Tuesday and announced a plan to transition into a tech-focused content provider, and Equitable Group, which reported record fourth quarter earnings. The two stocks ended up 10.75% and 10.60%, respectively. Shopify lost 6%.
On Wall Street, market-leading growth stocks, which thrived amid pandemic-related lockdowns, weighed on stocks for much of the day as investors favored shares that stand to gain most as ongoing vaccine deployment allows economic restrictions to be lifted.
“People are buying the dip, a move that’s been rewarded for months in a one-sided market,” said Dennis Dick, head of market structure and a proprietary trader at Bright Trading LLC.
“It’s tough to be a bear, it’s really tough. The only fear out there is the fear of missing out,” Dick said.
Fed Chairman Jerome Powell pushed back against concerns that the central bank’s economic support increased the risk of spiraling inflation, and insisted that the central bank’s accommodative monetary policy would remain in place for “some time.”
Testifying before the Senate Banking Committee, Powell said the economic recovery was “uneven and far from complete,” adding that investors are mostly responding to an anticipated rebound as vaccine deployment curbs the pandemic.
“People took his words to heart. It made them go back to their buying lists,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina. “For people with cash on the sidelines waiting to put it to work maybe his interview this morning gave people a little confidence to go back to drawing board and put money to work this afternoon.”
The Dow Jones Industrial Average rose 15.66 points, or 0.05%, to 31,537.35, the S&P 500 gained 4.87 points, or 0.13%, to 3,881.37 and the Nasdaq Composite dropped 67.85 points, or 0.5%, to 13,465.20.
Of the 11 major sectors in the S&P 500, seven closed in positive territory, but consumer discretionary and tech shares suffered the largest percentage losses.
Tesla Inc lost 2.2% to close in negative territory for the year, pulled down amid the tech selloff and falling bitcoin, which lost 12.0%. Tesla recently invested $1.5 billion in the cryptocurrency.
Cryptocurrency miners Riot Blockchain Inc and Marathon Patent Group Inc plunged 24.6% and 23.0%, respectively, while bitcoin bank Silvergate Capital Corp slid 20.1%.
Home improvement retailer Home Depot Inc posted better-than-expected quarterly earnings. But it cast doubt on whether spiking sales, driven by homebound consumers taking on do-it-yourself projects amid COVID lockdowns, are sustainable going forward. Its shares were the heaviest drag on the Dow, falling 3.1%.
The benchmark 10-year U.S. Treasury yield fell on Tuesday after Powell said the economy still needed central bank support. The 10-year note was down 1.4 basis point at 1.3551% in afternoon trading. It touched a high of 1.389% early Tuesday before Powell testified at a U.S. Senate Banking Committee hearing in Washington.
Powell said interest rates would remain low and the Fed’s bond purchases would continue “at least at the current pace until we make substantial further progress towards our goals ... which we have not really been making.”
Canada’s 10-year government benchmark bond, however, was higher for the day and rose to as much as 1.25%, which is now above year-ago levels. Doug Porter, chief economist with BMO, noted that the Canada 10-year yield is now above levels that prevailed back in the summer of 2019 and 2016, which were much more rosier economic times. “Yields have now sparked up almost 60 basis points just since the start of 2021, which rivals some of the biggest back-ups in the past decade over a similar time span,” he said in a note.
Declining issues outnumbered advancing ones on the NYSE by a 1.59-to-1 ratio; on Nasdaq, a 2.58-to-1 ratio favored decliners. The S&P 500 posted 51 new 52-week highs and no new lows; the Nasdaq Composite recorded 171 new highs and 54 new lows.
Oil prices settled near year-long highs on Tuesday on signs that global coronavirus restrictions were being eased, although concerns about the pace of a U.S. economic recovery and the return of Texas oil production kept gains in check. U.S. crude settled down 3 cents to $61.67 a barrel, still close to its highest levels since January 2020. Brent crude settled up 13 cents, or 0.2%, to $65.37 a barrel. Both contracts rose more than $1 earlier before retreating.
U.S. gold futures settled down 0.1% at $1,805.90.
With files from Reuters
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