The S&P 500 rose 0.3%, while the tech and health care-heavy Nasdaq, the components of which have a heavy market cap weighting in the S&P 500, was largely flat. A clear risk off signal was that the 10-Year Treasury yield sipped to 0.59%, its lowest level since April 21, when the bond market was still largely pricing in the need for more monetary stimulus. Yields fall when prices rise.
The NYSE FANG Index was only down 0.3% and the NYSE Healthcare index was up 0.6%. "While we got another batch of positive earnings reports, this time from the healthcare sector, the resurfacing trade worries have been holding back risk assets in early trading,” wrote Ken Berman, strategist at Gorilla Trades in emailed remarks to reporters.
Indeed, The U.S. ordered China to close its consulate in Houston, citing interference with American intellectual property. China said if the U.S. does not reverse its decision, China will respond firmly. Intellectual property theft is a hot button issue between the two countries and the White House has frequently blocked Chinese companies from buying U.S. semiconductor products that contain sensitive software. More broadly, the spat is reflective of the fact that a trade deal between the two countries is unlikely and escalated aggression seems more likely.
And large cap oil and banking were down between 1.% and 2%, while large cap consumer staples were flat-to-down. Other sectors were up slightly.
Lifting the Dow Jones Industrials Average to a slight gain was the $200 billion market cap Pfizer (PFE) - Get Free Report, up 4%. Pfizer and $20 billion BioNtech (BNTX) - Get Free Report, up 13%, have a deal to produce a free coronavirus vaccine, which the U.S. government funding to the tune of $1.5 billion. The companies say they can produce 100 million doses by end 2020 and $1 billion by end 2021. That validates the market’s thesis that a vaccine will emerge soon, although sentiment was held back by the China tensions.