Six US stock indices closed near their intraday record highs on Tuesday as retail sector earnings and growing expectations that Fed interest rates could be hiked again as soon as next month buoyed banks.
The S&P 500 market bellwether closed up 0.6% at 2,365 . Earlier it marked a record high of 2,366.71. It was led by Scripps Networks Interactive (NASDAQ:SNI) up 7.2% at $81.50.
Meanwhile, the Dow Jones Industrial Average closed up 0.6% at 20,743, having hit a record at 20,757.64. One of its top gainers and most-heavily weighted component, was investment bank Goldman Sachs (NYSE:GS) up 0.6% to $251.76 on growing credit tightening expectations.
The tech-heavy Nasdaq Composite closed up 0.5% at 5865, but not before hitting a record at 5,867.89.
The S&P Midcap 400 closed up 0.8% at 1749. It too hit a record high intraday at 1,749.85. The index was led by Chemours Company (NYSE:CC) up 7.7% at $35.60. The chemicals group beat fourth-quarter earnings estimates on Monday.
The S&P Smallcap 600 closed up 0.8% at 862, having marked a record high of 862.38. The index was led by Community Health Systems (NYSE:CYH) up 33.8% at $9.23.
Do you see a pattern here? Not to be left out, the wider small-cap Russell 2000 closed up 0.7% at 1409 and it too marked a record high intraday of 1,410.38. The ticker was led by Tronox Inc (NYSE:TROX) up 35% at $19.47 after announcing its fourth quarter earnings and agreeing to snap up the TiO2 business of Cristal, a privately held global chemical and mining company, for $1.673bn of cash and Class A ordinary shares representing 24% ownership in pro forma Tronox.
Earnings from Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) drove the gains alongside comments from Fed officials hinting at their propensity to vote for a March rate hike. Wal-Mart ended up 3% at $71.45 and Home Depot up 1.4% to $145.02.
But it wasn’t all gains. If any of the declines on Wall Street looked at all disappointing, spare a thought for a couple of ruptures in the over-the-counter sector.
Shares in the US mortgage giants Fannie Mae (OTCMKTS:FNMA) and Freddie Mac (OTCMKTS:FMCC) lost about a third of their value on Tuesday after a court struck a blow to shareholders in their quest to overturn a government decision to seize their profits.
A federal appeals court ruled 2-1 to uphold an earlier ruling that blocked investors from suing the government over its move in 2012 to require the two groups to pay their earnings to the US taxpayer. The case was brought by several groups of investors, including hedge funds, mutual funds, insurance companies and other stockholders.
Freddie Mac shares lost 30% to $2.79 and Fannie Mae down 28% to $2.99.
Early trading
US equities opened at fresh record highs on Tuesday, following strong corporate earnings from some major US retailers and a regional Federal Reserve bank president’s comments favouring an interest-rate rise pushing bank stocks higher.
After a three-day weekend, the benchmark S&P 500 opened 0.3% higher in New York. Meanwhile the Dow Jones Industrial Average and Nasdaq Composite both increased about 0.4% at the start of trading.
Wal-Mart (NYSE:WMT) and Home Depot (NYSE:HD) were among the major retailers to report before markets opened in New York, and both posted profits that beat expectations. Wal-Mart shares were up 3.5% at $71.80 while Home Depot was up 1.2% at $144.71.
The S&P 500 was last up 0.6% at 2364, having marked a fresh record high of 2,365.00. Top gainer was operates as a lifestyle content provider to cable TV groups Scripps Networks Interactive (NASDAQ:SNI) up 7.2% to $81.50. That was despite missing on fourth quarter earnings. Hot sales redeemed the stock. Revenues grew more than 4%. For the full year, operating revenues hit a record $3.4bn and consolidated ad revenues were a record $2.4bn, crossing $2bn for the first time.
The Dow was up 0.5% at 20,734 having hit a record 20,743.88 intraday, while the Nasdaq was still at up 0.4% at 5861, having marked a peak of 5,864.76 earlier.
Energy stocks led the run, with commodity prices lending a boost to corporate earnings.
Those gains were closely followed by financial stocks, in the wake of comments over the weekend from Patrick Harker, president of the Federal Reserve of Philadelphia, who said he would support raising interest rates at the central bank’s meeting in March.
Fed futures are pricing in close to a 50-50 chance of a rate hike in March.
Harker was also schedule to speak at 12pm on Tuesday at the Wharton School of the University of Pennsylvania. But Harker is a solitary voice. What matters is how other Fed officials scheduled to speak over the next few days see the outlook for rates.
The S&P Midcap 400 gained 0.6% to 1745 and was led by Tenet Healthcare Corp (NYSE:THC) up 6.2% to $20.57 while the S&P SMallcap 600 was up 0.8% at 861 and led by Community Health Systems (NYSE:CYH) up 31.3% to $9.06.
Also in the top three among small-caps was Popeyes Louisiana (NASDAQ:PLKI)up 19.2% to $78.80 after talk that Burger King’s owned Restaurant Brands International (TSE:QSR, NYSE:QSR) was eyeing a takeover. RBI shares were up 7.5% to C$75.96 in Toronto and up 7.2% at $57.77 on Wall Street.
Pre-Open
US stocks are set to rise on Tuesday, led by a buoyant retailing sector and after a market holiday the previous session, to immediately chalk fresh record highs.
Closed on Monday for Presidents Day in the US, the market last traded on Friday when all three major tickers – S&P 500, Dow Jones Industrial Average and Nasdaq Composite – closed on their intraday record highs. That means that any advance at the opening would mark fresh records.
The S&P 500 and Nasdaq are set to open 0.2% higher and the Dow up as much as 0.3%. If it happens and the momentum runs through to the closing bell, it will be the eighth successive trading session where they've hit new records.
Buoying initial gains will be retailers like Home Depot (NYSE:HD) whose shares were boosted in pre-market trading after the home improvement retailer said profits beat expectations in the final quarter of its tax year.
The company reported net earnings of $1.7bn in the three months to the end of January, equating to $1.44 per share, better than analysts’ expectations of $1.33 a share.
Sales for the quarter rose 5.8 per cent to $22.2bn, while annual sales were up 6.9 per cent to $94.6bn.
Home Depot shares were up 2% at $145.90 pre-market.
Another retailer faring well this session will likely be Wal-Mart Stores Inc (NYSE:WMT) which beat US sales estimates for its fourth quarter and accelerated e-commerce growth, as it reduced prices and invested heavily in its online operations.
US comparable sales increased 1.8%, faster growth than its guidance of between 1-1.5%, and faster than its third-quarter pace of 1.2%. E-commerce sales surged 29%, quicker than its third quarter pace of 20.6%.
Wal-Mart shares were up 3.6% at $71.85 pre-market.
Even poor numbers from Macy’s Inc (NYSE:M) failed to dent the sector’s allure.
Macy’s on Tuesday said revenues in the fourth quarter fell more than expected, however, adjusted earnings topped analysts’ estimates as the department store chain continues to right the ship and earned $675mln in cash proceeds from its real estate transactions.
The company, which has received a takeover approach from Hudson’s Bay, said it expects comparable sales to slide between 2.2% and 3.3% in fiscal 2017. Meanwhile, it expects total sales for the year to slide between 3.2% and 4.3% reflecting the closure of 66 stores last year.
Macy’s shares were up 3.6% at $33.45 pre-market.
Disappointment over Kraft Heinz Co’s (NASDAQ:KHC) decision to pull out of takeover ambitions of Anglo-Dutch rival Unilever (NYSE:UL) on Monday means the stock is trading 5% lower on $91.79 pre-market.
But the ADRs of Unilever are expected to fare even worse in New York, down 8.6% at $44.37 pre-market.
Meanwhile, shares in Popeyes Louisiana Kitchen (NASDAQ:PLKI) will pop at the open following reports that Burger King's parent company -- Restaurant Brands International (NYSE:QSR, TSE:QSR) -- is in discussions to buy the chain.
Read: Burger King owner’s plan to take Popeyes is hot
Popeyes shares were up 16.4% at $76.98 pre-market. RBI shares were up 2.2% at $55.10 pre-market in New York. Canadian bourses were also closed on Monday, on account of Family Day, so neither stock has traded since Friday.
Yahoo! Inc (NASDAQ:YHOO) agreed to take a $350mln cut on the original $4.8bn sale of its core business to Verizon (NYSE:VZ), becoming one of the first major US companies to revise deal terms due to a cyber attack.
Verizon, the US telecom giant, will now pay the California-based internet company $4.5bn, Yahoo said in a statement on Tuesday.
Yahoo shares were up 0.7% at $45.42 pre-market.
Meanwhile, shares in HSBC (NYSE:HSBC) are expected to get crushed as they are in London, after the UK-based bank reported an unexpected net loss of $4.2bn in the fourth quarter of 2016. The biggest single hit to its battered bottom line came from a $2.4bn writedown of the value of its private banking business in Europe.
The global banking giant has spent years cleaning up its private banking operations, notably in Switzerland. The business came under scrutiny over allegations that it catered to weapons dealers, tax evaders and dictators.
HSBC shares were down 6.5% at $41.08 pre-market.
Staying with banking, top officials from the Federal Reserve are making public speeches Tuesday, which could give investors more insights into their expectations for the US economy and interest rates.
Comments from Fed officials Neel Kashkari, Patrick Harker and John Williams could have significant sway over market moves.
Meanwhile, the election of US President Donald Trump seems to have given a shot of confidence to small and mid-sized businesses across America.
Every year since 2010 JPMorgan Chase, the biggest US bank by assets, has taken the pulse of thousands of its corporate customers around the country. This year the findings of the survey, conducted over the past few weeks, were dramatic: 80% of middle-market executives said they felt “optimistic” about the US economy. That was the highest reading yet, up from a relatively miserable 39% this time last year.
Expect gains by the mid-cap S&P 400 this session too.