(May 6): US stocks were on track to set a record high on Tuesday as the US-Iran ceasefire appeared to hold after clashes in the Strait of Hormuz and missile attacks against the United Arab Emirates raised tensions in the Gulf.
With investors bracing for another heavy day of earnings, the S&P 500 Index was up 0.8% to 7,255 at 11.36am in New York. That puts it above Friday’s record close of 7,230.
Eight of 11 sectors were in the green, led by materials and tech, the sector that helped power the S&P 500’s rally the past five weeks. The Nasdaq 100 Index rose 1.3%. West Texas Intermediate crude fell about 4.4% to roughly US$102 per barrel.
“While momentum investors ask, ‘Can you take me high enough?’, the market faces a macro reality check amid Middle East tensions that are driving oil and yields higher,” Piper Sandler chief market technician Craig Johnson wrote in a Tuesday note.
In earnings, Advanced Micro Devices Inc (AMD) reports after the bell. The chipmaker rose 3.6%, although David Nicholas, chief executive officer of Nicholas Wealth Management, said it’s “priced for perfection” ahead of the results.
See also: Stocks fall on doubts over imminent US-Iran deal
Palantir Technologies Inc shed 6.4% after boosting its revenue view, while missing US commercial sales estimates. ON Semiconductor Corp was little changed after its outlook suggested recovery in key markets will be slower than hoped. PayPal Holdings Inc sank 8.3% after saying it’s seeing trends at the lower end of its full-year outlook. Earlier, first-quarter adjusted earnings per share topped estimates, and the company said it plans to cut jobs. Pfizer Inc was little changed after reporting better-than-expected sales as demand for older blockbusters helped to offset a decline in revenues from Covid products.
GameStop Corp dipped 0.73% after investor Michael Burry sold his entire position, citing concern about debt as the retailer offers to buy eBay Inc for about US$56 billion in cash and stock.
In economic news, the Institute for Supply Management’s services index eased to a five-month low as orders growth slowed and input prices stayed higher.
See also: Stocks hit all-time highs on hopes war is near end
“The sharp drop in new orders and continued elevated level of inflation makes this a slightly negative reading on the economy,” Vital Knowledge founder Adam Crisafulli wrote.
Meantime, tax refunds have climbed US$47 billion versus last year, while tax payments have dropped US$63 billion, with much of the benefit accruing later in refund season to higher-income households who may not immediately spend the money, Wolfe Research’s Tobin Marcus wrote.
“We should already be past the peak impact on consumption, but with a residual cash cushion that will help buffer the economy against shocks [eg if the US-Iran crisis drives energy prices higher for longer],” Marcus said.
Later this week, attention will shift towards Friday’s payrolls report and its potential influence on Federal Reserve interest-rate policy.
“A strong jobs report would probably cause markets to price in meaningfully more hikes, even though we think hikes are unlikely,” Bank of Americas Securities US economist Shruti Mishra wrote in a Tuesday note. She anticipates a “solid” jobs report, based on jobless claims and weekly ADP data.
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