Stocks rose Tuesday as improving economic signals in the U.S. and overseas added to optimism for recovery from the pandemic-induced slowdown.
Big technology stocks led the way as they have for much of the rally since late March. The tech-heavy Nasdaq Composite set its 21st record close of the year and has risen for 16 of the past 18 trading days, its best such winning streak since 1999.
Amazon, whose shares are up 50% this year, rallied for the seventh consecutive session, its longest winning streak in nearly a year. Shares of Facebook, Apple and Microsoft joined in the rally and have benefited from work-from-home trends during the pandemic.
The economy has been hit hard by the coronavirus and related shutdowns, leaving investors to parse various data sources for signs of when business activity and corporate earnings can be expected to pick up.
“We’re watching the recovery and the process of the U.S. states reopening the economy very closely,” said Katerina Simonetti, senior portfolio manager at UBS Private Wealth Management. “It’s trial and error: They’re trying different things, seeing if they work or not. Assuming that it would work, we expect a sustained economic recovery for the third or perhaps fourth quarter of this year.”
The Nasdaq Composite rose 74.89 points, or 0.7%, to 10131.37, while the S&P 500 added 13.43 points, or 0.4%, to 3131.29. The Dow Jones Industrial Average gained 131.14 points, or 0.5%, to 26156.10.
The indexes have surged 40% or more from their March lows, leaving the broad S&P 500 down 3.1% for 2020. Some money managers and strategists caution this could point to additional volatility ahead, given that prices have rebounded while expectations for corporate earnings are significantly lower than before the coronavirus.
“In some ways the market is riskier now than it was prior to the pandemic,” said David Jilek, chief investment strategist at Gateway Investment Advisers. “Valuations are higher, volatility levels are higher and investors are still on edge.”
On Tuesday, preliminary results from IHS Markit data showed that business activity in the U.S. private sector improved for a second consecutive month in June, though it remained in contraction territory. In another positive sign, sales of new homes jumped sharply in May, according to Commerce Department data.
Overseas, the pan-continental Stoxx Europe 600 rose 1.3% after data from France suggested a stronger-than-expected recovery after lockdown measures were lifted. Activity levels in the broader eurozone also improved to their highest level since February, though the indicators continued to signal a contraction.
“What matters is acceleration in the growth rate of this data. We weren’t expecting to see the acceleration for a few months, but there are signs that we’re already getting some now,” said Sebastien Galy, a macro strategist at Nordea Asset Management. “That’s very positive for the equity market.”
Overnight, U.S. futures and Asian stock markets were buffeted by conflicting signals from the Trump administration on the trade deal with China. White House trade adviser Peter Navarro sparked confusion among investors when he told Fox News that the agreement was “over” in a Monday evening interview. President Trump then tweeted to say the deal was “fully intact.”
Markets have been spooked in recent weeks by signs of deterioration in the U.S.-China relationship, so Mr. Trump’s clarification “was very important for it not to go back to a crisis mode,” said Stephane Monier, chief investment officer of Lombard Odier. Investors are closely scrutinizing the power struggle between the two largest economies in the world, he said.
The yield on the 10-year U.S. Treasury note edged up to 0.708% from 0.704% Monday. Yields rise as bond prices fall.
Write to Karen Langley at karen.langley@wsj.com and Anna Hirtenstein at anna.hirtenstein@wsj.com
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