Gold surged past the $2,000 mark on Tuesday after Democrats and the White House appeared closer to agreement on new stimulus to help the coronavirus-hit economy while stocks on Wall Street traded mixed as investors awaited more aid from Washington.
Oil prices also rose on the prospect of more stimulus but Treasury yields fell to their lowest since March on safe-haven demand and concerns about the ultimate cost of aid.
Markets have lost confidence that Congress will approve enough stimulus to provide adequate benefits, leading the Federal Reserve to boost its balance sheet, said Lee Ferridge, head of North America macro strategy for State Street Global Markets.
“It all falls back on the Fed, that is what’s driving this,” Ferridge said. “Gold is outperforming, Treasuries are outperforming. It’s all about the debasement of the dollar.”
Gold prices breached the psychological $2,000 level for the first time, propelled by hopes Washington will approve more stimulus to combat the economic toll of the still spreading pandemic.
The U.S. Senate’s top Democrat said a new round of coronavirus relief was moving in the right direction, though the two sides remain far apart.
Spot gold prices rose 1.42% to $2,004.81 an ounce, after bids earlier hit highs of $2,009.134 an ounce.
Bullion has soared more than 30% so far this year, supported by lower interest rates and safe-haven buying on concerns Fed policy and government stimulus are debasing the dollar.
The bond market, which is at loggerheads with equity markets over stimulus and its role in the economy, is skeptical about the prospects of a rebound in economic growth in the third quarter.
“There is a concern about how much the stimulus package will help the economy, and its cost over time,” said Kevin Giddis, chief fixed income strategist at Raymond James.
The 10-year U.S. Treasury notes slid 4.8 basis points to yield 0.5151% after earlier trading as low as 0.51%.
Canada’s main stock index rose on Tuesday, as data showing domestic manufacturing activity expanded in July for the first time in five months bolstered optimism around a post-coronavirus economic recovery.
The IHS Markit Canada Manufacturing Purchasing Managers’ index (PMI) rose to a seasonally adjusted 52.9 in July from 47.8 in June, extending its recovery from 33.0 in April when businesses were closed to help contain the coronavirus pandemic.
The Toronto Stock Exchange’s S&P/TSX composite index was up 198.83 points, or 1.23%, at 16,368.03.
The energy sector climbed 3.7%, lifted by gains in shares of Enerplus Corp. and Crescent Point Energy Corp., which increased 9.1% and 7.3%, respectively.
The materials sector, which includes precious and base metals miners and fertilizer companies, rose 2.6%. Centerra Gold Inc. and Nutrien Ltd. rose 8.1% and 6.8%, respectively.
The S&P 500 ended higher after a choppy session on Tuesday, lifted by energy stocks but limited by declines in AIG and Microsoft while investors awaited more U.S. government stimulus to fight economic fallout from the COVID-19 pandemic.
The S&P 500 energy index jumped and was the strongest performer among 11 sectors, while healthcare declined .
Ralph Lauren Corp dropped to its lowest since May after quarterly revenue plunged due to coronavirus-related store closures and a slowdown in global demand for luxury goods.
American International Group Inc tumbled after its quarterly adjusted profit slumped.
Notwithstanding those two reports, about 83% of the 352 companies in the S&P 500 that have reported quarterly results so far have beaten estimates for earnings, according to IBES Refinitiv data.
“Investors are still comfortable that the trajectory of earnings is on the right path and the 2021 outlook has remained intact. All that helps support the market at these levels,” said Lindsey Bell, chief investment strategist at Ally Invest.
“But there is an underlying level of uncertainty leading to a bit of caution,” Bell added.
Investors are awaiting a major new coronavirus-aid bill, with Senate Democratic Leader Chuck Schumer saying talks with the White House were moving in the “right direction.”
A rally in tech-related stocks and trillions of dollars in monetary and fiscal stimulus have lifted the S&P 500 to within about 3% of February’s record high.
Microsoft Corp, which is looking to buy short-video app TikTok’s U.S. operations, fell, weighing on the Nasdaq.
White House officials could not say how the U.S. government would receive a portion of the proceeds from any sale of TikTok’s U.S. operations, one day after President Donald Trump called for a cut of the money.
Unofficially, the Dow Jones Industrial Average rose 166.47 points, or 0.62%, to 26,830.87, the S&P 500 gained 12.14 points, or 0.37%, to 3,306.75 and the Nasdaq Composite added 38.37 points, or 0.35%, to 10,941.17.
Evergy Inc slumped after two sources said the board of the Midwest utility planed to remain independent as bids solicited from prospective merger partners did not offer sufficient value.
Take-Two Interactive Software Inc rose after it raised its annual adjusted sales forecast on demand for its videogame franchises “Grand Theft Auto” and “NBA 2K.”
Rival Activision Blizzard Inc gained ahead of its results due after the closing bell.
Walt Disney Co, Fox Corp and Wynn Resorts Ltd are also expected to report quarterly results later in the day.
MSCI’s benchmark for global equity markets rose 0.47% after earlier hitting a five-month high, less than 4% from its all-time peak in February. The index was lifted overnight when stocks rallied in Asia on relatively strong manufacturing data from around the world reported on Monday.
Shares in Europe slid. The broad pan-regional FTSEurofirst 300 index closed down 0.10% at 1,412.42 after a strong rally on manufacturing data on Monday.
Disappointing results from Diageo Plc, the world’s largest spirits maker, and German drugs and pesticides group Bayer, took the shine off growth-linked cyclical stocks.
BP cut its dividend for the first time in a decade after a record $6.7 billion second-quarter loss, when the pandemic hammered fuel demand. Its shares rose 6.5% after BP unveiled a plan to reduce its oil and gas output by 40% and boost investments in renewable energy.
Oil prices edged higher, with Brent on track for a five-month high, on hopes for more stimulus and signs America may be making progress on controlling the coronavirus spread.
Brent crude futures rose 28 cents to settle at $44.43 a barrel. U.S. crude futures gain 69 cents to settle at $41.70 a barrel.
U.S. gold futures hit a record of $2,023.09 an ounce and settled 1.7% higher at $2,021.
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