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Nasdaq, S&P 500 Reach Record Highs On Broad Based Buying Interest

wallstreet aug24 01dec20 lt

Following the pullback seen in the previous session, stocks showed a strong move back to the upside during trading on Tuesday. With the upward move on the day, the Nasdaq and the S&P 500 reached new record closing highs.

The major averages finished the session off their best levels of the day but still firmly positive. The Dow climbed 185.28 points or 0.6 percent to 29,823.92, the Nasdaq surged up 156.37 points or 1.3 percent to 12,355.11 and the S&P 500 jumped 40.82 points or 1.1 percent at 3,662.45.

Strength in the overseas markets carried over onto Wall Street following the release of upbeat Chinese manufacturing data.

China's manufacturing sector logged its strongest growth in a decade in November to indicate a sustained recovery from the Covid-19 outbreak, survey data from IHS Markit showed.

Continued optimism about a potential coronavirus vaccine also generated buying interest, with Pfizer (PFE) and BioNTech (BNTX) applying to the European Medicines Agency for conditional marketing authorization of their vaccine.

Meanwhile, traders largely shrugged off a report from the Institute for Supply Management showing a slowdown in the pace of growth in U.S. manufacturing activity.

The ISM said its manufacturing PMI dropped to 57.5 in November from 59.3 in October, with a reading above 50 indicating growth in the manufacturing sector. Economists had expected the index to dip to 58.0.

"Survey Committee members reported that their companies and suppliers continue to operate in reconfigured factories," said Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.

"But absenteeism, short-term shutdowns to sanitize facilities and difficulties in returning and hiring workers are causing strains that will likely limit future manufacturing growth potential," he added. "Panel sentiment, however, is optimistic."

A separate report from the Commerce Department showed a bigger than expected increase in construction spending in the month of October.

In testimony before the Senate Banking Committee, Federal Reserve Chair Jerome Powell called the economic outlook "extraordinarily uncertain" and noted it will depend, in large part, on the success of efforts to keep the coronavirus in check.

"The rise in new COVID-19 cases, both here and abroad, is concerning and could prove challenging for the next few months," Powell said. "A full economic recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities."

"Recent news on the vaccine front is very positive for the medium term," he added. "For now, significant challenges and uncertainties remain, including timing, production and distribution, and efficacy across different groups."

Sector News

Steel stocks saw substantial strength on the upbeat Chinese manufacturing data, with the NYSE Arca Steel Index spiking by 4.5 percent to its best closing level in well over a year.

Significant strength was also visible among gold stocks, as reflected by the 4.5 percent jump by the NYSE Arca Gold Bugs Index.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for February delivery soaring $38 to $1,818.90 an ounce.

Oil service stocks also turned in a strong performance despite a decrease by the price of crude oil, resulting in a 3.6 percent gain by the Philadelphia Oil Service Index.

Financial, computer hardware and airline stocks also saw considerable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved notably higher during trading on Tuesday. Japan's Nikkei 225 Index jumped by 1.3 percent, while China's Shanghai Composite Index spiked by 1.8 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index soared by 1.9 percent, the French CAC 40 Index surged up by 1.1 percent and the German DAX Index advanced by 0.7 percent.

In the bond market, treasuries moved notably lower amid the rally on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 9 basis points to 0.934 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to payroll processor ADP's report on private sector employment in the month of November.

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