Stocks rose by midday Tuesday after the ISM manufacturing index showed a beat of expectations. Still, tech stocks lead the trading action.
The S&P 500 rose 0.35%, with the tech-heavy Nasdaq up 1%. The 10-Year treasury yield rose to 0.71%. Yields rise when prices fall. The rising yield is signaling it is playing catch-up with inflation expectations, which have been recently bolstered by the Federal Reserve’s updated inflation policy. On some trading days of late, the yield rises even when economically sensitive stocks are challenged, like on Tuesday morning.
The institute for Supply Chain Management’s manufacturing survey came in at a reading of 56 for the month of July, beating expectations of 54.9. Any reading above 50 represents year-over-year growth in activity. Large cap industrial stocks rose 0.7% Tuesday, with materials up more than 1%.
Other cyclicals rose as well, with banking up as much as 0.9%. That move seems to have less to do with the incremental expansion in the yield curve, but rather with the expectation of higher economic activity and therefore loan volumes in months to come. Plus, as the Fed makes clear it will keep rates pinned down for the foreseeable future, banks are rushing to lower deposit interest rates in order to sustain current levels of profitability, which Morgan Stanley analysts pointed out in a note.
Aiding the S&P 500 was Apple (AAPL) - Get Apple Inc. (AAPL) Report, up 3% to $132 a share after Bloomberg reported that the company has asked suppliers to produce components for 75 million 5G iPhones for 2020, which adds to the company’s expected unit sales for the year. More importantly, this is another indicator of strong hardware demand even through the pandemic.
Apple shares have risen sharply of late, but the news is still a boost to investor interest in the stock. Semiconductors therefore rose as well, with the iShares PHLX Semiconductor ETF (SOXX) - Get iShares PHLX Semiconductor ETF Report up 1.8% as the fund is home to several Apple suppliers and investors see tech hardware demand coming in with strength in the near-term.