Stocks were mixed Tuesday, but the tone of the market was fairly optimistic on the direction of the economy.
The S&P 500 fell less than a tenth of a percentage points because large cap tech fell, as the Nasdaq fell almost 0.3%. The 10-Year Treasury yield was flat at 0.78%, while the 30-Year Treasury yield rose to 1.60%, signifying confidence in longer-term inflation.
Monday, oil prices surged, as did cyclical stocks and treasury yields. Investors seemed to have gotten comfortable with a stable and growing economic outlook for the next year or so.
Recently, inflation expectations have been firming and the V-shaped economic recovery has maintained itself, all of which favors cyclical stocks. Large cap growth tech stocks, which still show signs of potential outperformance on a sustained basis, have been seeing many days of late on which they take a back seat. The potentially $80 billion IPO market for 2020, which is larger than the post-1990 high of $60 billion, has intrigued investors looking for growth alternatives to FAANG stocks.
Tuesday, bank and oil stocks rose more than 2%, while manufacturing rose a bit under 1% and consumer discretionary was mixed, but mostly positive. These economically-sensitive sectors were outperforming the more meager gains seen in defensive stocks like consumer staples and utilities.
Even though Federal Reserve Chairman Jerome Powell warned Tuesday of dire economic consequences without more fiscal stimulus, market sentiment was unwavering. Cyclical stocks were up by slightly lesser amounts in the morning before Powell made the comment and 18 of the 30 stocks on the Dow Jones Industrial Average were in the green by noon. The Dow, up a hair by noon, is mostly tilted towards value stocks — cyclical and defensive — but also slightly tilted towards growth tech.
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