Stocks fell Tuesday, with the S&P 500 closing in on a record level earlier in the session as hopes for a vaccine and further stimulus spurred a global risk rally and a pop in “reopening” stocks. The Nasdaq underperformed again, with some major tech names that had recently led the market higher giving back some gains.
Russia’s President Vladimir Putin said Tuesday that Russia became the first country globally to give regulatory approval to a Covid-19 vaccine, with the move coming less than two months after human testing of the inoculation began. The vaccine still must complete final trials, though mass production is expected by the end of the year.
“Every time you get some good news on Covid, and now we’ve got a potential vaccine coming from Russia – it’s skeptical at best, but nevertheless, the market is embracing it at this point,” David Nelson, Belpointe chief strategist, told Yahoo Finance’s “The First Trade” on Tuesday.
“Every time we get news on that, or something bright economically, we start to move out of these large cap secular growth names and move down that valuation trade to more cyclical shares,” he said. “And it makes sense, because some names in the Nasdaq – in particular, cloud and some other areas like stay-at-home stocks, are pretty egregiously expensive. Some of these names are a 1000x earnings, 50x cash flow.”
Shares of travel companies including Wynn Resorts (WYNN), Norwegian Cruise Line Holdings (NCLH), Carnival Corp. (CCL) and a host of airlines jumped amid the vaccine news, and after InterContinental Hotels (IHG) suggested an improvement in travel demand in first-half results released before the bell on Tuesday. The commentary added to other recent upbeat assessments of consumer sentiment around travel, with Marriott (MAR) on Monday also suggesting travel trends were improving from an April low. Chinese electric car-maker Nio (NIO) rose after giving strong deliveries and revenue guidance for the current quarter, with auto demand in China rebounding.
Elsewhere in markets, US crude oil futures added to gains after rising by the most in nearly 3 weeks as of Monday’s settlement. Gold stumbled below $2,000 per ounce, falling by the most since March. Treasury yields rose as prices fell.
Investor attention also remained locked on prospects of further fiscal stimulus from Congress, after President Donald Trump over the weekend unleashed a set of executive orders to provide some economic support without congressional action. The moves have already led some states to push back, and New York Governor Andrew Cuomo said the order to have states chalk up a portion of the funds the proposed enhanced unemployment benefit “only digs the hole deeper” for states already grappling with budget deficits. Further stimulus discussions in Congress, however, hang in abeyance.
During remarks late Monday, Trump added that he was considering a capital gains tax cut.