U.S. markets and stock exchange traded funds strengthened Tuesday with cyclical and economically sensitive sectors leading the charge as optimism over stimulus and earnings help lift these lagging areas.
On Tuesday, the Invesco QQQ Trust (NASDAQ: QQQ) was down 0.5%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) rose 1.1%, and SPDR S&P 500 ETF (NYSEArca: SPY) gained 0.7%.
U.S. lawmakers and White House officials are still deliberating on a new coronavirus aid package as the enhanced unemployment assistance expires at the end of the month, potentially leaving tens of millions of Americans without the needed financial support, Reuters reports.
Meanwhile, European Union officials also agreed on a historic Covid-19 relief package of their own.
“The big stimulus package that the European Union decided to do is definitely putting a bid under all equities worldwide including the U.S.,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told Reuters. “The vaccine story has been very positive for the last couple days and that’s part of the optimism on moving a little bit more towards cyclicals.”
U.S. markets have been rallying in recent weeks on promising results from Covid-19 treatment trials and hopes that a vaccine may soon help alleviate some of the uncertainty.
Meanwhile, investors are bracing for one of the worst earnings seasons as companies reveal the extent of the damage from the coronavirus pandemic on second-quarter profits.
“Commentary on earnings call has been really important to investment communities, confirming the recovery story that’s seen in the broad (economic) data applied to individual businesses, like Coca Cola,” Matt Stucky, portfolio manager, equities, at Northwestern Mutual Wealth Management Co, told Reuters.
According to FactSet, earnings are still expected to fall roughly 44% year-over-year for S&P 500 companies, the Wall Street Journal reports. Investors will be watching for big names like Amazon.com, Microsoft, and American Express this week.
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