Stocks were largely flat Tuesday, as investors weighed virus-related risks against positives like climbing oil prices.
The S&P 500 flipped between the red and green, down 0.09% by midday. The 10-Year Treasury yield slipped to 0.7%, a slight risk-off signal.
On the positive side, Saudi Arabia announced an oil production cut of 1 million barrels per day starting June 1, enabling crude to rise 6% to $25 a barrel. High oil prices are a key to a meaningful chunk of employment in the U.S. Importantly, the production cut is minimal compared to the velocity of the downward jolt in demand, but investors are encouraged to see yet another cut in 2020.
Most oil stocks remained largely in line with the market, but Exxon Mobile (XOM) rose 0.6%.
And while some cyclical stocks, like large cap consumer discretionaries, banks, and energy companies outperformed in the morning, there were some risk-off signals within the equity market. The Russell 2000, a small cap index, fell as much as 0.69%. Small companies are often more vulnerable to negative changes in the economy and many of them have heavy debt burdens.
With equity valuations stretching on account of low interest rates and optimism on a fast economic recovery, investors are having trouble pushing the S&P 500 much past 2,900, a level of technical resistance, according to one strategist.
Investors are increasingly concerned that a second wave of coronavirus infections, spurred by reopenings around the globe, could lengthen shutdowns and subsequently elongate the economic trough the market is expecting to observe in the summer of 2020.
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