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Dow slips as stock-market investors watch Powell, Mnuchin testify

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U.S. stocks were trading little changed Tuesday, following the best day for the S&P 500 index and the Dow Jones Industrial Average since early April.

Wall Street was watching congressional testimony from Federal Reserve chair Jerome Powell and U.S. Treasury Secretary Steven Mnuchin and parsing earnings reports from major retailers, including Dow components Walmart and Home Depot.

The Dow Jones Industrial Average
DJIA,
-0.10%

fell 52 points, or 0.2% at 24,549, the S&P 500 index
SPX,
+0.11%

gained 4 points, or 0.1%, to 2,958, while the Nasdaq Composite index
COMP,
+0.59%

gained 63 points, or 0.7% at 9,298.

On Monday, the Dow surged 911.95 points, or 3.9%, to finish at 24,597.37, after briefly advancing 1,000 points. The S&P 500 rose 90.21 points, or 3.2%, to end at 2,953.91. The Nasdaq Composite
COMP,
+0.59%

added 220.27 points, or 2.4%, closing at 9,234.83. The gains were the best rally for the Dow since April

With Monday’s gains, the S&P 500 has recovered 32% from its March 23 low, and is now about 13% below its record high in February.

What’s driving the market?

Markets took a breather following Monday’s aggressive rally, with investors taking profits in stocks in the cyclical sectors, like energy and financials, which led in the previous session and as the tech sector resumed its leadership role.

“You’ve got relative calm today,” said Yousef Abbasi, global market strategist for institutional equities at INTL FCStone told MarketWatch. “I think after a day like yesterday, where you’re up 3%, it does speak to the strength of the market to come back and just be flat today.”

Abbasi said that investors were watching testimony on Capitol Hill, but that markets were little moved on what they had heard as of late Tuesday morning as “a lot of what they’re saying is reiterative.”

Powell and Mnuchin began taking questions via videoconference before the Senate Banking Committee at 10 a.m. Eastern as part of testimony required by the $2 trillion economic-relief package approved by Congress that is intended to provide assistance to small businesses and individuals who have been affected by the lockdown protocols in place to combat the COVID-19 pandemic.

The Fed chair already has suggested that lawmakers, rather than monetary-policy makers, need to do more to support an economy that is likely in the throes of a deep recession as a result of actions taken to curtail the spread of the viral outbreak.

“As a society, we should do everything we can to provide relief to those who are suffering for the public good,” Powell said in prepared remarks.

Markets on Monday showed signs of ebullience as investors hung on the more upbeat portions of statements made by Powell during an interview with CBS’s “60 Minutes” on Sunday night in which he said he expects the economy to start to improve in the second half of 2020.

Mnuchin also has expressed some optimism about a recovery in the last six months of the year. The Treasury Secretary will tout the successes of initiatives like the Paycheck Protection Program, while emphasizing the need to “open the economy in a way that minimizes risks to workers and customers,” according to planned testimony.

Their testimony comes a day after markets surged higher amid an upbeat report from pharmaceutical firm Moderna Inc.
MRNA,
-5.83%

which said it was optimistic about a vaccine candidate that had produced antibodies in phase-one clinical trials.

“The powerful move higher for risk assets – even in the face of a plethora of risks such as seething US-China tensions and second virus waves – underscores how thirsty this market is for any positive news,” wrote Marios Hadjikyriacos, investment at XM, in a Tuesday note.

That’s because “If things go right and a vaccine is developed quickly, everything goes back to normal and it’s a bullish environment,” he added. “If things go wrong and the recession worsens, for instance on a wave of bankruptcies or second virus waves or ‘hotter’ US-China tensions, then governments and central banks will be forced to stimulate even more.”

Also on traders’ radar were comments by President Trump late Monday threatening to permanently cut off U.S. funding to the World Health Organization. He has accused the organization of cooperating with China to play down the magnitude of the coronavirus outbreak in its early stages, and the rhetoric was noted by analysts as a sign of heightened tensions between the world’s two largest economies.

In economic news, construction of new homes fell 30% in April to the lowest level since 2015, though building permits were issued at a higher rate than forecast.

Powell and Mnuchin will be the main attraction for the day, but Boston Fed President Eric Rosengren also speaks at 2 p.m.

See also: Nasdaq plans to toughen rules that could make it harder for Chinese companies to list on its exchange: report

Which stocks are in focus?
  • The Dow’s biggest gainer early Tuesday was Walmart Inc.
    WMT,
    +1.01%

    after the retailer reported first-quarter earnings and sales that handily beat consensus estimates and a 74% increase in e-commerce sales. Shares were trading up 1% Tuesday.

  • Shares of fellow Dow component Home Depot Inc.
    HD,
    -1.94%

    fell 2.1% after the home improvement retailer reported a fiscal first-quarter profit that missed expectations, although revenue and same-store sales rose more than forecast

  • Pier 1 Imports Inc.
    PIRRQ,
    -61.90%

    said Tuesday it is seeking bankruptcy court approval to start an orderly wind-down of its business operations as soon as possible given current COVID-19 store closures.

  • Shares of Kohl’s Corp.
    KSS,
    -7.57%

    fell 8.3% after the retailer reported first-quarter results.

How are other markets trading?

U.S. government bond yields were lower, with the 10-year Treasury note
TMUBMUSD10Y,
0.711%

down 2 basis points at 0.72% on Tuesday, following its biggest daily rise since March 18, according to Dow Jones Market Data. Bond prices move in the opposite direction of yields.

The U.S. dollar weakened against a basket of its major rivals, with the ICE U.S. dollar index
DXY,
-0.17%

trading down 0.2% Tuesday in New York.

In precious metals, gold futures for June delivery
GCM20,
+0.54%

rose $10.20, or 0.6%, to trade at $1,744 an ounce. Meanwhile, crude prices for June delivery
CLM20,
-1.50%

gained 62 cents, or 1.9%, at $32.43 a barrel on the New York Mercantile Exchange, after surging 8.1% gain to end at a two-month high.

In global equities, the Stoxx Europe 600 index
SXXP,
-0.61%

traded 0.6% lower, while the FTSE 100
UKX,
-0.76%

pulled back 0.8%. In Asia trade, Japan’s Nikkei
NIK,
+1.48%

rose 1.5%, Hong Kong’s Hang Seng jumped 1.9%, the
SHCOMP,
+0.80%

Shanghai Composite Index climbed 0.8%, while the CSI 300 Index
000300,
+0.85%

closed 0.9% higher.



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