U.S. stock markets closed higher on Tuesday, partially recovering major losses that they suffered on the first day of the week. All three major indexes ended in positive territory. Investors reacted cautiously as the U.S. government continues to provide mixed signals on the ongoing trade conflicts. The broad-based market rally was led by the energy sector as crude prices surged on supply concerns.
The Dow Jones Industrial Average (DJI) closed at 24,283.11, up 0.1%. The S&P 500 Index (INX) also increased 0.2% to close at 2,723.06. The Nasdaq Composite Index (IXIC) closed at 7,561.63, gaining 0.4%. A total of 6.77 billion shares were traded on Tuesday, lower than the last 20-session average of 7.28 billion shares. Advancers outnumbered decliners on the NYSE by 1.52-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.43-to-1 ratio. The CBOE VIX decreased 8.1% to close at 15.92.
How Did the Benchmarks Perform?
The Dow rose 0.1% with 16 of the 30-stock index closed in the green, 13 in the red and 1 unchanged. However, the blue-chip index ended below its 200-day moving average for the second straight session. Notably, the 200-day moving average is a technical barrier to gauge the index’s long-term momentum trends.
The S&P 500 gained 0.2% led by 1.3% gain of the Energy Select Sector SPDR (XLE). Notably, eight out of 11 sectors of the benchmark index ended in positive territory.
The tech-laden Nasdaq Composite increased 0.4% reversing the index’s third-straight losing streak. No further escalation of trade tensions helped large-cap tech stocks, especially the FAANG stocks, to partially rebound from their sharp decline on Monday.
Mixed Signals for Global Trade War
At present, an impending trade war fear is the major concern of stock markets. Investors opted for extreme cautiousness while taking decisions as the White House has been providing mixed signals to trade conflicts.
On Jun 24, The Wall Street Journal reported that President Trump is considering restricting Chinese investment in high-tech U.S. companies. On Jun 25, Treasury Secretary Steven Mnuchin first tweeted that the WSJ published “fake news”.
However, he later clarified that restrictions will apply to all countries including China if they try to steal proprietary tech assets of U.S. companies. On the same day, Peter Navarro, a trade advisor to President Donald Trump stated in a CNBC interview that White House has no plans on imposing investment restrictions on China or other countries.
Meanwhile, Atlanta Federal Reserve President Raphael Bostic said trade tensions represent a risk to the economy. He ruled out a fourth rate hike by the Fed if situations turn worse.
Energy Sector Rally on Oil Price Surge
On Jun 26, crude prices surged on the back of renewed fear of a global oil shortage in the second half of 2018. West Texas Intermediate (WTI) crude gained $2.45 or 3.6% at $70.53 a barrel on the New York Mercantile Exchange. This was WTI’s highest close since May 24. Brent crude rose $1.58 or 2.1% at $76.31 a barrel on ICE Futures Europe. This was its highest finish in nearly two weeks.
As per a recent report by The Wall Street Journal, citing a senior U.S. State Department official, the United States wants all countries to stop importing oil from Iran by Nov 4 or face the risk of U.S. sanctions. Moreover, Venezuela is plagued with economic instability, massive debt load, unrest in the workforce and hyperinflation. These factors are likely to take a severe toll on the country’s oil production till the end of 2018.
Meanwhile, on Jun 22, the group comprising of OPEC (Oil and Petroleum Exporting Countries) countries and non-OPEC allies led by Russia decided to raise production quota by 624,000 barrels a day. However, Saudi Arabia already signaled that the country is not confident enough to bring on production quickly enough to replace a shortfall.
Furthermore, problem erupted in Libya. Reuters reported that eastern Libyan commander Khalifa Haftar’s forces have handed control of oil ports to a National Oil Corporation based in the east. However, internationally recognized NOC in Tripoli has dismissed the move as illegal. Additionally, the temporary shutdown of the Canadian oil-sands facility, which produces 360,000 barrels a day of crude bolstered oil prices.
Share price of petroleum behemoths like Exxon Mobil Corp. (XOM - Free Report) and Chevron Corp. (CVX - Free Report) decline 1% and 1.1%, respectively. Exxon carries a Zacks Rank #3 (Hold) while Chevron sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Conference Board reported that the U.S. Consumer Confidence dropped to 126.4 from a revised 128.8 in May lagging the consensus estimate of 126.9. While American’s remain optimistic about their current economic conditions, the long-term expectations have declined. Notably, consumer spending accounts for about 70 percent of U.S. economic activity.
The S&P/Case-Shiller national index gained a seasonally adjusted 0.3% in April. The index was up 6.4% year over year. Meanwhile, the 20-city index rose a seasonally adjusted 0.2% and was up 6.6% year over year.
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