US stocks broke through session highs on Tuesday, but major benchmarks were still on track for another gains session when the Federal Reserve began a two-day policy meeting.
The Nasdaq led the broader market as tech stocks continued to make up lost ground during last week’s selloff.
How are equity benchmarks doing? The Dow Jones Industrial Average (DJIA) climbed 79.39 points, or 0.3%, to 28,072.72, while the S&P 500 (SPX) gained 26.23 points, or 0.8%, to 3,409.77. The Nasdaq Composite (COMP) was up 162.46 points, or 1.5%, to 11,219.11.
On Monday, the Dow was up 327.69 points, or 1.2%, to finish at 27,993.33, after trading briefly above the 28,000 mark. The S&P 500 added 42.57 points, or 1.3%, to close at 3,383.54. The Nasdaq Composite was up 203.11 points, or 1.7%, to finish at 11,056.65, rebounding from a course that last week saw the tech index enter correction territory falling more than 10 % from a maximum record.
What is driving the market?
A resumption of M&A activity in the tech sector helped equities regain their footing after last week’s selloff, perhaps prompting investors to reason that valuations wouldn’t be so strained if companies like chip maker Nvidia Corp.
(NVDA) were poised to make acquisitions, Elliott Savage, portfolio manager for YCG Enhanced Fund, said in an interview. Nvidia on Sunday said it has reached an agreement to buy Arm Holdings from SoftBank for $ 40 billion.
However, caution remains in order, he said. A strong rally in equities outside of the March pandemic lows was fueled by a combination of earnings fundamentals improvements for some tech-oriented companies capable of increasing market share, as well as increased speculative interest.
While investors have largely given companies a pass on second-quarter earnings, third-quarter results are likely to come under more scrutiny, while political uncertainty surrounding the November presidential election could increase the potential for more volatility, Savage said.
Investors were heartened on Monday by positive news about a COVID-19 vaccine from AstraZeneca (AZN) and BioNTech (BNTX) and we were looking at Tuesday for a product launch of The Apple company. (AAPL) and several IPOs.
“Each positive headline on the vaccine offers greater clarity on the timing and potential success of vaccine delivery, shining the light at the end of the tunnel for this pandemic and the economic devastation it has wreaked in many industries,” said Michael Reynolds, Head of Strategy of investment to Glenmede Trust Co., in the comments via email.
The Federal Reserve began its policy-making meeting on Tuesday, which will be followed by a press conference and policy statement on Wednesday, while the Bank of England and Bank of Japan central bank decisions will be announced on Thursday.
The Federal Open Market Committee’s policy-making meeting would also be the first since the central bank introduced its new policy framework for targeting average inflation.
At his post-meeting press conference, Federal Reserve Chairman Jerome Powell will likely be punctuated with questions about how the Fed intends to measure maximum employment and average inflation, said Steven Ricchiuto, US chief economist at Mizuho Securities.
While the committee “will want to keep policy as flexible as possible by keeping these aspects vague, the press will try to nail President Powell to the details so deviations from the target can be quantified,” he said.
Investors are also looking for Snowflake Inc., a cloud computing company, which will go public on the New York Stock Exchange this week and has the backing of Warren Buffett. Berkshire Hathaway (BRK) (BRK) e Salesforce.com (CRM) On Monday, Snowflake increased the proposed price range for its initial public offering from $ 100 to $ 110, from $ 75 to $ 85. The company plans to offer 28 million shares to raise up to 3.08 billion. dollars.
Check-out: Snowflake IPO: 5 things to know about the Berkshire-backed company as it heads for record-breaking software offering
Apple Inc. (AAPL) is holding its first virtual-only product reveal, where the Cupertino, California-based tech giant showed off its latest smartwatch, a debut that could provide a new catalyst for the famed company’s stock. The iPhone maker has also released a new training class subscription service. Apple shares were up 0.7%.
Analysts said a positive tone for equities was also helped by economic data from China, where retail sales rose in August for the first time in 2020. Sales rose 0.5% year-over-year. last month, according to the Chinese National Bureau of Statistics.
In US economic data, the New York Fed’s Empire State Economic Conditions Index rose 13.3 points to 17 in September. Economists had expected a reading of 6, according to an Econoday poll. The gain reverses a 14-point drop in August. US industrial production increased 0.4% in August, following a revised 3.5% increase in July.
See: The IPO market gears up for the busiest week since May 2019, the week of Uber’s IPO, with 12 offers available
What actions were the focus of attention?
- Actions of Oracle Corp. (ORCL) rose 2.6% after the Wall Street Journal reported that the Trump administration was reviewing offers from companies to become the “strategic partner” for US operations of TikTok, which is owned by ByteDance with based in China.
- BioNTech (BNTX) shares were up 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 accelerated development of a COVID-19 vaccine in collaboration with mate Pfizer Inc. (PFE) e Fosun Pharma.
- Actions of Charles Schwab Corp. (SCHW) fell 2.5% after the discount broker provided poor third-quarter revenue forecasts.
- Nikola Corp. (NKLA) shares fell 6.3% after a report that the Securities and Exchange Commission is investigating allegations made last week by short seller Hindenburg Research, who called the electric truck maker a “tangled fraud” . Nikola denied the allegations.
- Bentley Systems Inc. set the terms of its initial public offering, with the price valuing the company as high as $ 4.96 billion.
How are other markets traded?
The 10-year Treasury note yield (BX: TMUBMUSD10Y) rose by a single basis point to 0.679%, as a positive tone for equities and other risky assets decreased demand for traditional havens like government bonds. Bond prices move inversely to yields.
The ICE US Dollar Index (DXY), which tracks the greenback’s performance against its major rivals, was flat.
Gold futures (GCZ20) rose 0.2% to stand at $ 1,956.30 an ounce one day after hitting a roughly two-week high. The US crude oil (CL) benchmark rose 1.9% as Hurricane Sally, a dangerous Category 2 storm, approached the Gulf Coast.
Global equities were up, with the Stoxx Europe 600 (XX: SXXP) index gaining 0.7%, while the UK benchmark FTSE 100 (FR: UKX) rose 1.3%. In Asia, Hong Kong’s Hang Seng Index (HK: HSI) was up 0.4% and the Shanghai Composite Index (CN: SHCOMP) was up 0.5%. The Japanese Nikkei (JP: NIK) was down 0.4%.
Video: Wall Street Seeks To Recover From Last Week’s Slump (CNBC)
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