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Midday Market Update: Stocks Rise in Fragmented Market

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Stocks rose Monday on the strength of a rebound in tech stocks ahead of their earnings reports. 

By midday Monday, the S&P 500 rose 0.5%%, powered by the tech-heavy Nasdaq’s gain of 1%. Bearishly, the 10-Year Treasury yield continued sinking to 0.59%. Yields fall when prices rise. 

The NYSE FANG Index was down 5% from July 20 into Monday, as sky-high tech valuations are met with earnings reports that could be sobering, as investors look to see if the accelerated growth trends from the at-home environment are closer to sustainable or closer to one-time. Earnings this week will come from Amazon  (AMZN) - Get Free Report, Facebook  (FB) - Get Free Report and Apple  (AAPL) - Get Free Report, which are up between 1% and 2% throughout the day. Those reports could be pivotal, as earnings have already sent shares of other big tech names down. 

But cyclical sectors oil, banking and consumer discretionary were down between 0.25% and 1.4%. Congress is expected to pass a bill worth trillions to cover employment for small businesses and near-term cash flow gaps for households. But Washington has been slow to do so, which has cause some detectable level of risk-aversion of late. 

"The stimulus negotiations in Washington continue to be in focus,” wrote Ken Berman, strategist at Gorilla Trades, in emailed remarks to reporters. And while some optimism can be detected in the industrials and materials sectors, which were rising a bit Monday, “market breadth has been relatively weak this morning, with advancing issues only outnumbering decliners by a 6-to-5 ratio on the NYSE at midday,” Berman said. 

For industrials and materials, 70% and 80% of companies in those sectors, respectively, have seen better-than-expected earnings, according to data from Morgan Stanley strategists. The second quarter has been a pivotal one, as investors had expected it to mark the trough in year-over-year earnings declines for 2020. Still, guidance and visibility have been poor-to-non-existent throughout the reporting season, which is one dynamic investors had anticipated as they sold off cyclical stocks in June and July, as virus cases spiked. 

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