Stock ETFs Trade Mixed As Investors Weigh Earnings And Stimulus

Stocks and index ETFs are mixed on to higher Tuesday as traders examine a fresh collection of corporate earnings while they await signals for potentially more U.S. fiscal stimulus.

The Dow Jones Industrial Average advanced 283 points higher, or 1.2%, while the S&P 500 added 0.6%, and the Nasdaq Composite notched an intraday record, testing last week’s high, before being rejected and trading 0.6% lower as of noon EST.

Stock index ETFs are also trading mixed after opening green along with their underlying benchmarks. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), are positive in early afternoon trade Tuesday, while the Invesco QQQ Trust (QQQ) is showing losses after advancing earlier in the session.

Earnings news helped to boost the Dow and S&P 500, with IBM advancing 2% after the company reported better-than-expected second-quarter earnings. The company’s gross margins were better in 60% of its units in the past quarter. The First Trust NASDAQ Technology Dividend Index Fund(TDIV) which contains the stock was up slightly on the news.

Meanwhile, while Coca-Cola said its profit sank 33% in the second quarter, the beverage company were optimistic that demand would improve as lockdown restrictions associated with the coronavirus were eased, boosting shares 3.4%. The iShares Evolved U.S. Consumer Staples ETF (IECS), which contains Coca-Cola, rallied 1.94% amid the news.

So far, 58 S&P 500 companies have reported calendar second-quarter earnings and 81% of them have bested analyst projections, according to data from Nick Raich of The Earnings Scout. However, Raich noted that the blended S&P 500 earnings growth estimates, which include the companies that have reported and the forecast for those yet to report, is still showing a decline of 43.61% year over year.

Traders also added positions in lackluster value names while growth stocks in the Nasdaq fell after the index tested last week’s highs. The iShares Edge MSCI USA Value Factor ETF (VLUE) popped 1.1% as a result.

Investors are closely watching the talks in Washington on the next coronavirus relief bill. Lawmakers feel pressure to pass legislation before July concludes, at which point the $600 per week federal unemployment insurance benefit is set to expire.

U.S. Senate Majority Leader Mitch McConnell and Treasury Secretary Steven Mnuchin were scheduled to discuss details for additional aid to Americans at the White House on Tuesday. Mnuchin has suggested that $1 trillion would represent a minimum amount in recovery funds, with Democrats supporting a package that would be worth over $3 trillion.

“I believe the stock market would benefit from the news of a stimulus package coming to fruition,” Kristina Hooper, Invesco’s chief global market strategist, said in a note. “In times like this, despite a massive and rising budget deficit for the US, I believe big government is likely to be good news for the stock market.”

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