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Stocks on Tuesday erased some modest early gains to trade mixed, struggling for direction a day after the worst decline in more than a month due at least partly to worry that rising cases of COVID-19 globally are prompting renewed restrictions on business activity.
The market’s soft tone comes as investors also digest a barrage of earnings from the likes of Dow components 3M Co., Merck & Co. and Caterpillar and news of a proposed $35 billion deal announcement between chip makers Advanced Micro Devices and Xilinx Inc.
What are major benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.07% was down 56 points, or less 0.2%, at 27,638, while the S&P 500 SPX, +0.08% traded about 3 points, or 0.1%, lower at 3,399. The Nasdaq Composite COMP, +0.42% was up 45 points, or 0.4%, at 11,404.
The Dow on Monday fell 650.19 points, or 2.3%, to finish at 27,685.38, after dropping more than 900 points at its session low. The S&P 500 dropped 64.42 points, or 1.9%, to end at 3,400.97, while the Nasdaq Composite declined 189.34 points, or 1.6%, to close at 11,358.94. The Dow’s fall was its biggest one-day point and percentage drop since Sept. 3, while the S&P 500 suffered its biggest decline since Sept. 23.
What’s driving the market?
Equity markets were drawing some optimism from upbeat corporate earnings reports and merger news, against the backdrop of rising coronavirus cases, while the chance of a fresh fiscal aid package from lawmakers before the Nov. 3 presidential election looks all but dead.
The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed above 43.5 million on Tuesday, according to data aggregated by Johns Hopkins University, while the death toll rose to 1.16 million. The U.S. has the highest case total at 8.7 million. On top of that, the rise in the seven-day average of new cases in the U.S. reached an all-time high of 68,767.
The U.S. Senate broke for a recess before the elections after confirming Amy Coney Barrett as the 115th Supreme Court justice, filling the vacancy left by the death of Ruth Bader Ginsburg, but it appears unlikely that a fresh fiscal aid package can be voted on before the election.
See: Washington finally abandons economic stimulus plan until after the election
That said, investors’ expectations are growing that elections in early November will lead to a so-called Democratic blue wave, where the left gains a majority in the Senate as well as the House, which is viewed as a positive path toward a substantive and wide-ranging fiscal package.
Former Vice President Joe Biden leads incumbent Donald Trump by 7.8 percentage points, according to a recent average of polls from RealClearPolitics, while the Democratic challenger also leads Trump in key battleground states, which could decided the race for the Oval Office, by 4.1 percentage points.
Edward Moya, senior market analyst at Oanda, in a Tuesday research note said that the mood on Wall Street was initially influenced on Monday by hope “that the presidential election would deliver a ‘blue wave’ and provide massive stimulus on coronavirus relief, infrastructure spending and expanded health benefits.”
“Republicans are hoping for a strong Election Day turnout, but it seems President Trump has not been able to gain much momentum following the last debate,” Moya wrote.
Upbeat corporate news also improved sentiment early Tuesday as Advanced Micro Devices announced a merger with Xilinx, Exact Sciences said it would buy Thrive Earlier Detection Corp. and United Parcel Service Inc. UPS, +1.39% said Tuesday it is planning to hire 50,000 seasonal workers this Friday at its annual “UPS Brown Friday” hiring blitz.
Corporate earnings reports so far Tuesday have been better than expected from Merck, Xerox and JetBlue, while Harley-Davidson said it wouldn’t provide guidance due to uncertainty tied to the pandemic, though the motorcycle maker’s shares still popped higher on its better-than-expected results.
In economic reports, U.S. durable-goods orders rose a stronger-than-expected 1.9% in September.
The Case-Shiller national home price index saw a 5.2% year-over-year gain in August, up from revised 4.1% in July. An October consumer confidence gauge set for release at 10 a.m. is expected to slip to 101.7 from 101.8.
Which companies are in focus?
- Advanced Micro Devices Inc. AMD, -4.54% said Tuesday it has reached an agreement to acquire Xilinx Inc. XLNX, +8.01% in an all-stock deal valued at $35 billion. Xilinx shares jumped over 13%, while AMD shares were trading near unchanged
- Shares of Harley-Davidson Inc. HOG, +19.93% jumped more than 11% after the motorcycle company reported third-quarter earnings and revenue that well exceeded the Street forecast.
- Shares of Pfizer Inc. PFE, -1.84% were down 1.7% after the drugmaker missed sales expectations for the quarter. Pfizer had earnings of $2.2 billion, or 39 cents per share, in the third quarter of 2020, down from $7.7 billion, or $1.36 per share, in the same quarter a year ago
- Shares of JetBlue Airways Corp. JBLU, -0.99% were flat, after the air carrier swung to a narrower-than-expected loss, as revenue fell less than forecast.
- Exact Sciences Corp. EXAS, +17.32% said Tuesday it has agreed to acquire Thrive Earlier Detection Corp. in a cash and stock deal worth up to $2.15 billion. Its shares jumped 13%.
- Defense contractor Raytheon Technologies RTX, -2.50% said its third-quarter net income slumped to $264 million, or 17 cents a share, from $1.15 billion, or $1.33 a share, while sales rose to $14.74 billion from $11.37 billion. Shares fell 2%.
- Eli Lilly & Co. LLY, -5.33% shares fell 5%, after the drugmaker posted weaker-than-expected earnings for the third quarter, while U.S. government officials put an early end to a study testing an Eli Lilly antibody drug for people hospitalized with COVID-19.
- Merck & Co. Inc. MRK, +1.26% said its profit and sales for the September quarter rose as it continued to work on treatments and vaccines for Covid-19. Shares were off 0.1%.
What are other markets doing?
The yield on the 10-year Treasury note TMUBMUSD10Y, 0.791% was down 1 basis point at 0.791%.
The pan-European Stoxx 600 Europe index SXXP, -0.56% and London’s FTSE 100 stock index UKX, -0.49% were both down 0.4%.
Oil futures were buoyed as Tropical Storm Zeta moved toward the Gulf Coast, with the U.S. benchmark CL.1, +0.96% up 0.7%. Gold was little changed, with the December contract GCZ20, +0.10% hovering near $1,906 an ounce.
The ICE U.S. Dollar Index DXY, -0.17%, a measure of the currency against a basket of six major rivals, was down 0.2%.
