Stocks were mostly higher on Tuesday, drifting to the upside as traders weighed concerns over the Delta variant’s latest spread against optimism over an ongoing rebound in economic activity.
The S&P 500 and Dow each eked out record intraday highs, while the Nasdaq dipped. A day earlier, both the S&P 500 and Dow sank, dragged down by energy stocks amid concerns over reinstated travel restrictions in China due to rising coronavirus infections. Investors on Tuesday eyed the passage of a sweeping $1 trillion infrastructure bill by the U.S. Senate, with the legislation to rebuild roads, bridges and other physical infrastructure across the country now headed to the House of Representatives.
U.S. West Texas intermediate crude oil futures (CL=F) advanced Tuesday to recover after reaching a three-week low on Monday. Treasury yields rose across the curve, and the benchmark 10-year yield broke above 1.34%.
Shares of AMC Entertainment (AMC) gained after the movie theater operator topped second-quarter revenue estimates, with customers’ return to the theaters taking place more forcefully than anticipated at the start of the summer. Shares of peer “reopening” stock Planet Fitness (PLNT), however, dipped after the gym’s full-year sales and profit outlook missed estimates, suggesting a slower-than-expected consumer return to in-person workouts.
Investors this week have been appraising the extent of the growth slowdown that might be triggered by the latest resurgence in domestic and global coronavirus cases. According to a number of economists, the virus has already set off a measurable deceleration in U.S. consumer spending.
“In the last couple of weeks, we’ve started to see a little bit of pullback in some of the travel and entertainment-type categories, really with the most noticeable pullback in spending on airlines,” JPMorgan Chase senior economist Jesse Edgerton told Yahoo Finance on Monday, citing Chase credit card spending data. “It’s still a small decline compared to the absolute collapse essentially to zero that happened during the first COVID wave back in March and April of last year … Now that we’re at a higher level and people are starting to travel again to some extent, it looks like they’re pulling back more than they did when they were still at very low levels last year.”
Others, however, believe that these concerns will ultimately deflate, especially given they are unlikely to catalyze the same kind of economy-wide shutdowns that characterized the restrictions last year.
“I think lot of the fears around the Delta variant in particular are a bit overblown,” Elyse Ausenbaugh, JPMorgan Private Bank global market strategist, told Yahoo Finance. “Although I think investors are grappling with the Delta variant and treating that as a primary brick in the so-called ‘wall of worry,’ I don’t think it’s something that derails the longer-term view.”
“Ultimately, investors are going to stay focused on those super-strong fundamentals, like easy financial conditions, robust consumer demand and also that labor market recovery,” she added.
Policymakers have also taken note of the pick-up in economic activity, and two Federal Reserve officials on Monday suggested the U.S. economy was nearing the threshold of “substantial further progress” in recovering that would trigger a shift away from highly accommodative monetary policy. Federal Reserve Bank of Atlanta President Raphael Bostic said the economy “would have made the ‘substantial progress’ toward the goal” set by the central bank if U.S. job gains come in as strongly as they did in June and July for another couple months, according to Bloomberg. And Richmond Federal Reserve President Thomas Barkin, likewise, said “on the price side, we made substantial progress,” with inflation running well above the central bank’s achieving 2% average inflation.
Emily McCormick·Reporter