US close: Stocks finish higher on retail sales, stimulus hopes

Wall Street stocks closed in the black on Tuesday, amid stronger-than-expected retail figures and news of more monetary and fiscal policy support from the Federal Reserve and the White House.

The Dow Jones Industrial Average ended the session up 2.04% at 26,289.98, the S&P 500 added 1.9% to 3,124.74, and the Nasdaq Composite was 1.75% firmer at 9,895.87.

It was a positive session throughout for the Dow, which opened 784.84 points higher, continuing on a rally started in the previous session despite market participants struggling with signs of a second wave of Covid-19 cases as the US economy emerges from lockdown.

Sentiment was boosted late in the previous session following an announcement from the Federal Reserve that it would look to purchase individual corporate bonds.

Driving markets on Tuesday, however, was a report from Bloomberg that stated the President was in the process of putting together a $1trn infrastructure proposal.

The report indicated that the White House would be setting aside the majority of the funds for more traditional infrastructure projects, like roads and bridges, but said funds would also be reserved for 5G wireless infrastructure and rural broadband.

Also in focus, investors hoping for a stronger-than-expected reading on monthly retail sales on Tuesday weren't disappointed.

According to the Department of Commerce, in seasonally adjusted terms, US retail sales volumes surged at a 17.7% month-on-month pace in May to reach $485.5bn.

That was comfortably ahead of the 7.4% increase predicted by the consensus, and came on top of an upwardly revised 14.7% drop in April, from a preliminary reading of a negative 16.4%.

“The key point here is that the control measure excludes food service, the weakest single component of retail sales, and auto sales, which remain 6% below the February level,” noted Ian Shepherdson, chief economist at Pantheon Macroeconomics.

“But it includes food sales at supermarkets and grocery stores, which jumped as people stopped eating out, and sales of building materials, which surged as people on lockdown began working on home projects.”

Shepherdson said it was a good thing the control measure rebounded so much, but it did not tell the full story.

“Essentially, the switch from restaurants to eating at home, and the increase in home renovations triggered by the lockdowns, flatter the control measure of retail sales, even as total spending remains depressed.”

Federal Reserve chair Jerome Powell was also urging caution, suggesting that market participants would be best to not overreact to the surprisingly good economic data.

While Powell admitted that multiple economic indicators had pointed to a stabilisation in activity, “the levels of output and employment remain far below their pre-pandemic levels, and significant uncertainty remains about the timing and strength of the recovery."

Elsewhere on the macro front, industrial production rose by 1.4% in May as factories resumed operations following Covid-19 related shutdowns, according to the Federal Reserve.

Capacity utilisation came in at 64.8% and manufacturing output, which had dropped sharply in March and April, increased 3.8% in May.

On the other hand, business inventories dropped more than expected in April as the Covid-19 pandemic depressed imports, indicating that inventory investment could be a drag on economic output yet again during the second quarter.

The Commerce Department revealed business inventories dropped 1.3% in April after falling 0.3% in March.

Economists had been expecting a drop of 0.8%.

Lastly, builder sentiment shot up a massive 21 points in June to 58, the largest monthly increase ever in the history of the National Association of Home Builders/Wells Fargo housing market index.

"As the nation reopens, housing is well-positioned to lead the economy forward," said NAHB Chairman Dean Mon.

"Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising".

Multiple reports claiming dexamethasone, a widely available drug, could aid critically ill coronavirus patients and had reportedly cut deaths by as much as a third also had investors hopeful.

In equities, casino operator Caesars Entertainment was up 2.99% after reporting that revenue from reopened properties in May and June was flat to 2% higher, while Weight Watchers owner WW International surged 18.94% after it said Covid-19 lockdowns had boosted digital subscriber numbers.

Consumer technology giant Apple was ahead 2.65%, even as EU regulators said they were launching an investigation into whether Cupertino breached competition law through its Apple Pay service and App Store software.

On the downside, power utility PG&E was down 0.27% after it pleaded guilty to killing 84 people in a 2018 northern California wildfire caused by its infrastructure, and agreed to pay a fine of up to $3.5m.

Dow Jones - Risers

Caterpillar Inc. (CAT) $130.11 5.26%
Merck & Co. Inc. (MRK) $77.00 3.99%
Boeing Co. (BA) $197.77 3.58%
Home Depot Inc. (HD) $249.95 3.56%
Chevron Corp. (CVX) $94.03 3.07%
International Business Machines Corporation (CDI) (IBM) $125.15 2.88%
Apple Inc. (AAPL) $352.08 2.65%
Cisco Systems Inc. (CSCO) $46.48 2.49%
Microsoft Corp. (MSFT) $193.57 2.45%
Unitedhealth Group Inc. (UNH) $293.00 2.35%

Dow Jones - Fallers

Dowdupont Inc. (DWDP) $30.52 0.00%
Pfizer Inc. (PFE) $33.40 0.12%
McDonald's Corp. (MCD) $190.32 0.44%
Intel Corp. (INTC) $60.40 0.50%
Visa Inc. (V) $193.12 0.58%
JP Morgan Chase & Co. (JPM) $102.06 0.80%
Coca-Cola Co. (KO) $46.77 1.02%
Travelers Company Inc. (TRV) $116.15 1.13%
Raytheon Technologies Corporation (RTX) $67.82 1.15%
Walt Disney Co. (DIS) $118.44 1.16%

S&P 500 - Risers

Eli Lilly and Company (LLY) $163.79 15.68%
Nordstrom Inc. (JWN) $19.50 12.91%
Kohls Corp. (KSS) $24.82 8.96%
Vulcan Materials Co. (VMC) $123.15 8.76%
Gap Inc. (GPS) $11.38 8.48%
United Rentals Inc. (URI) $158.29 7.65%
Martin Marietta Mtrl (MLM) $214.15 7.50%
Ross Stores Inc. (ROST) $97.62 6.89%
Occidental Petroleum Corp. (OXY) $20.29 6.51%
Nucor Corp. (NUE) $44.59 6.37%

S&P 500 - Fallers

Apache Corp. (APA) $14.57 -17.82%
Discovery Inc. Class A (DISCA) $22.26 -2.15%
Wynn Resorts Ltd. (WYNN) $90.51 -1.62%
Newmont Corporation (NEM) $55.95 -1.58%
TripAdvisor Inc. (TRIP) $20.51 -1.49%
Nvidia Corp. (NVDA) $362.74 -1.15%
Take-Two Interactive Software Inc. (TTWO) $135.67 -1.08%
Dxc Technology Company (DXC) $16.22 -1.04%
Discovery Inc. Class C (DISCK) $20.03 -0.89%
Borg Warner Inc. (BWA) $33.61 -0.77%

Nasdaq 100 - Risers

Ross Stores Inc. (ROST) $97.62 6.89%
Autodesk Inc. (ADSK) $240.93 5.21%
Baidu Inc. (BIDU) $122.78 5.10%
Lam Research Corp. (LRCX) $305.48 4.93%
QUALCOMM Inc. (QCOM) $89.52 3.62%
Micron Technology Inc. (MU) $51.02 3.61%
Western Digital Corp. (WDC) $44.47 3.59%
Analog Devices Inc. (ADI) $122.69 3.54%
Dish Network Corp. (DISH) $35.24 3.53%
Marriott International - Class A (MAR) $93.99 3.52%

Nasdaq 100 - Fallers

Trip.com Group Limited (TCOM) $25.97 -3.21%
T-Mobile Us, Inc. (TMUS) $102.89 -1.71%
Wynn Resorts Ltd. (WYNN) $90.51 -1.62%
Nvidia Corp. (NVDA) $362.74 -1.15%
Take-Two Interactive Software Inc. (TTWO) $135.67 -1.08%
Tesla Inc (TSLA) $982.13 -0.89%
Electronic Arts Inc. (EA) $125.73 -0.62%
Activision Blizzard Inc. (ATVI) $73.00 -0.26%
NetEase Inc. Ads (NTES) $412.23 -0.23%
Comcast Corp. (CMCSA) $39.75 -0.20%