Tech stocks were dragging the major U.S. indices lower, while most sectors were rising.
The S&P 500 rose as much as 0.1%, held back by losses in tech stocks, as the Nasdaq fell as much as 0.2%. The 10-Year Treasury yield was flat at 0.78%. Yields and prices move in opposite directions.
Cyclical stocks were doing the legwork, outperforming defensives like consumer staples. Bank stocks rose largely more than 1%. Oil stocks rose a little less than 1%. Consumer discretionary stocks, especially airlines, were up as much as around 1%.
As for bank earnings, investors expect to see moderating loan loss provisions quarter-over-quarter, with profits pressured by low interest rates and few loans made, but the bank stocks are rallying Tuesday on incremental optimism on the direction of the economy and earnings growth. Also, Goldman Sachs analysts say the poor expected third and fourth quarter have been priced into bank stocks.
The price of crude oil rose more than 3% to more than $40 a barrel.
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 as 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, which is larger than the post-1990 high of $60 billion, has intrigued investors looking for growth alternatives to FAANG stocks.
Investors have digested that, while there is some possibility of drastic policy swings upon a Joe Biden presidency, it is likely that those changes will be rather incremental. Instead, investors have taken some chips off the table ahead of a potential ballot-counting delays or even problem.
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