Tuesday’s Stock Market Close: US Equities Rise As Dow Surges 557 Points, Nasdaq Underperforms, Yields Drop

KEY POINTS

  • JP Morgan Chase and Citigroup posted better-than-expected second quarter earnings
  • Wells Fargo posted a net loss of $2.4 billion in the second quarter
  • Tech rally evaporated as traders took profits on Nasdaq stocks

U.S. stocks rose on Tuesday as the tech-heavy Nasdaq relinquished market leadership in favor of the surging Dow.

The Dow Jones Industrial Average gained 556.79 points to 26,642.59, while the S&P 500 rose 42.3 points to 3,197.52 and the Nasdaq Composite Index climbed 97.73 points to 10,488.58.

The Dow was paced by Caterpillar (CAT) which jumped 4.88%.

Tuesday’s volume on the New York Stock Exchange totaled 3.85 billion shares with 1,934 issues advancing, 26 setting new highs, and 1,061 declining, with 12 stocks setting new lows .

Active movers were led by Rigel Pharmaceuticals Inc. (RIGL), Nio  Inc. (NIO) and Vaxart Inc. (VXRT) .

U.S. bank JP Morgan Chase (JPM) posted better-than-expected second quarter earnings of $1.38 per share on revenues of $33 billion. Citigroup (C) also posted better than expected second-quarter results.

But Wells Fargo (WFC) posted a net loss of $2.4 billion in the second quarter and set aside $8.4 billion in loan loss reserves due to the coronavirus pandemic. Wells Fargo also cut its dividend to $0.10.

Corporate profits are expected to plunge by 44% in the second quarter, according to Refinitiv, with the financial sector expected to see profits plummet by more than 52%.

“What’s so influential about the banks reporting early in the earnings season in times like these is we’re really counting on banks’ management team’s view on what’s going on,” said Susan Schmidt, head of U.S. equities at Aviva Investors. “Banks are the foundation of our U.S. economy. They are there to provide loans to small businesses and to manage the retail consumers’ deposits.”

U.S. consumer price index gained by 0.6% in June, more than expected. Core CPI increased by 0.2%.

Covid-19 infections remained on traders minds as the state of New York added four more states on its quarantine list.

Charles Diebel, head of fixed income at Mediolanum International Funds of Dublin, Ireland warned: “The real worrying aspect for the market really is that the rise in U.S. infections will make people behave like a lockdown even if they are opening up.”

Schmidt of Aviva added: “I think what we’re seeing here [in the stock market] is the ongoing push-pull between the rising cases of coronavirus versus the states reopening the economies and the market is grappling with the balance and how that will work out over time.”

The National Federation of Independent Business’ Small Business Optimism Index rose by 6.2 points to 100.6 in June.

“We’re starting to see positive signs of increased consumer spending, but there is still much work to be done to get back to pre-crisis levels,” NFIB’s chief economist Bill Dunkelberg said.

Overnight in Asia markets finished lower, as China’s Shanghai Composite index slipped 0.83%; Japan’s Nikkei-225 fell 0.87%; and Hong Kong’s Hang Seng exchange dropped 1.14%.

In Europe markets finished mixed, as Britain’s FTSE-100 edged up 0.6%, while France’s CAC-40 tumbled 0.96% and Germany’s DAX dropped 0.8%.

Crude oil futures edged up 0.42% at $40.27 per barrel, Brent crude slipped 0.14% at $42.84. Gold futures fell 0.12%.

The yield on the 10-year Treasury dropped 3.91% to 0.615% while yield on the 30-year Treasury fell 2.62% to 1.302%.