Dow, S&P 500 Reach New Record Highs But Nasdaq Moves To The Downside

After closing on opposite sides of the unchanged line for two straight sessions, the major U.S. stock indexes turned in another mixed performance during trading on Tuesday. While the Dow and the S&P 500 reached new record highs, the tech-heavy Nasdaq moved to the downside.

The Dow moved higher early in the session and remained firmly positive throughout the day before closing up 162.82 points or 0.5 percent to 35,264.67. The S&P 500 fluctuated over the course of the session but managed to inch up 4.40 points or 0.1 percent to 4,436.75.

Meanwhile, the Nasdaq came under pressure after seeing initial strength and ended the day down 72.09 points or 0.5 percent at 14,788.09.

The advances by the Dow and the S&P 500 may have partly reflected continued economic optimism following last Friday’s upbeat monthly jobs data.

News that the Senate has approved a $1 trillion infrastructure bill may also have generated some positive sentiment. The package now heads to the House, where it faces an uncertain future.

Buying interest was somewhat subdued, however, as traders looked ahead to the release of a Labor Department report on consumer price inflation in the month of July on Wednesday.

Economists currently expect consumer prices to climb by 0.5 percent in July after advancing by 0.9 percent in June. The annual rate of consumer price growth is expected to slow to 5.3 percent from 5.4 percent.

Core consumer prices, which exclude food and energy prices, are expected to rise by 0.4 percent in July following a 0.9 percent increase in June. Year-over-year core price growth is expected to drop to 4.3 percent from 4.5 percent.

The Labor Department is scheduled to release a separate report on producer price inflation in the month of July on Thursday.

The inflation data could have an impact on the outlook for monetary policy, although the next Federal Reserve meeting is not scheduled until September.

Concerns the Fed may begin scaling back its asset purchases sooner than currently expected may have weighed on high-growth tech stocks.

Sector News

Steel stocks moved sharply higher over the course of the session, driving the NYSE Arca Steel Index up by 3.2 percent to its best closing level in three months.

Considerable strength was also visible among oil service stocks, as reflected by the 2.5 percent jump by the Philadelphia Oil Service Index.

The rally by oil service stocks came amid a rebound by the price of crude oil, with crude for September delivery surging up $1.81 to $68.29 a barrel after tumbling $1.80 to $66.48 a barrel on Monday.

Transportation stocks also turned in a strong performance on the day, resulting in a 1.9 percent advance by the Dow Jones Transportation Average.

Kansas City Southern (KSU) helped lead the sector higher after Canadian Pacific Railway (CP) raised its offer to acquire the railway operator to about $300 per share.

Natural gas, oil producer and housing stocks also saw notable strength, while gold stocks saw significant weakness despite an increase by the price of the precious metal.

Biotechnology and semiconductor stocks also moved to the downside on the day, contributing to the drop by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index edged up by 0.2 percent as trading resumed following a long weekend, while China’s Shanghai Composite Index jumped by 1 percent.

The major European markets also moved to the upside on the day. While the U.K.’s FTSE 100 Index climbed by 0.4 percent, the German DAX Index ticked up by 0.2 percent and the French CAC 40 Index inched up by 0.1 percent.

In the bond market, treasuries extended the downward trend seen over the past several sessions. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.5 basis points to 1.342 percent.

Looking Ahead

Trading on Wednesday is likely to be driven by reaction to the report on consumer price inflation, which could impact estimates for when the Fed will begin scaling back its asset purchases.

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