Markets Risk-Off Tuesday, Buoyed By Tech: What Wall Street’s Saying

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Stocks fell Tuesday as coronavirus cases began to tick up again. Shares of big tech companies rallied increasingly throughout the day, supporting major indices.  

The S&P 500 fell 0.78%, while the safe 10-Year Treasury bond saw its yield slip to 0.83% from 0.88%. In the morning, the S&P 500 was down 1.2% before the tech-heavy Nasdaq began to rise. The Nasdaq, with its large-cap tech components bearing heavy weight on the S&P 500, ended the day up 0.29%. Tuesday’s trading action signaled heavy risk-off sentiment. 

Daily coronavirus cases in the U.S., on a 7-day moving average, have risen to roughly 25,000 from about 17,000 before May 27. That’s according to data from Johns Hopkins.

Wall Street wasn’t making much mention of this Tuesday, but the biggest risk to the market has been said to be a second wave of infections. Meanwhile, the recent protests have stoked some fear of a second wave, although the cause of the recent uptick is not yet completely clear. 

Looking at the performers of the day, it was growth tech stocks, which can provide some level of shelter from economic pain.

The NYSE FANG Index, which encapsulates roughly 20% of the S&P 500’s market capitalization, rose 1.3%. 

Consumer discretionary stocks fell hard, with the airlines some of the biggest losers. United Airlines  (UAL) - Get Report fell 8.32% and American Airlines  (AAL) - Get Report fell 8.67%. Cruise stocks took a hit. Bank stocks also tumbled as the yield curve compressed some. Oil stocks fell considerably as well. 

The coronavirus aside, the S&P 500 has risen 42% since its bear market low March 23, bringing to a level just 5% below its all-time-high. This is against worries from economists and strategists that the economy is not close to producing the same level of pre-virus output. 

Here’s what Wall Street’s saying: 

Matthew Harrison, Head, Biotech Research, Morgan Stanley:

“In the United States, the trend and scope continues to be worse than other western countries. The reproduction numbering the U.S. remains slightly over 1, an indication that the spread remains on-going. The peak is significantly flatter and wider than other countries and our total predicted infections now stand at 2.5M (versus 2.3M last week and 1.4M just a month ago). Many states have started to reach new highs in cases and we are now watching to see if any states breakout in the net 2-4 weeks.”

Jeff Buchbinder, Equity Strategist, LPL Financial:

"The path of the economy over the rest of the year depends on whether COVID-19 infection rates continue to fall, facilitating more and faster re-openings and a return to some semblance of normal consumer behavior. Alternatively, a potential second wave of the virus could lead to lockdowns being put back in place and consumers staying home. This recession has been consumer led and consumers—with help from the government, medical professionals, and perhaps Mother Nature—will have to lead us out."

Rob Glownia, Senior Portfolio Manager, Riverfront Investments:

"Some investors are understandably baffled by the 40 % rally in the S&P 500 since the market low on March 23rd. What is happening to stocks is consistent with other recessions and the Great Recession of 2008/09. The S&P 500 bottomed in March of 2009 and rose every month for the next 6 months, recovering 50% of its losses by the end of the year. This happened well in advance of any meaningful improvement in earnings, but rather in the expectation that the improvement would follow… which it did."

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