Dow Inches Up To New Record Closing High But Nasdaq, S&P 500 Edge Lower

After climbing to new record intraday highs early in the session, stocks turned mixed over the course of the trading day on Tuesday. The Dow managed to hold onto a modest gain, while the broader Nasdaq and the S&P 500 slid into negative territory.

While the Dow crept up 64.35 points or 0.2 percent to a new record closing high of 31,522.75, the Nasdaq fell 47.98 points or 0.3 percent to 14,047.50 and the S&P 500 edged down 2.24 points or 0.1 percent to 3,932.59.

The early strength on Wall Street largely reflected recent upward momentum, which has propelled the major averages to new record highs despite a lack of major catalysts.

Optimism about additional stimulus from Washington has helped prop up the markets as Democrats continue to move forward with President Joe Biden’s proposed $1.9 trillion relief package.

Recent signs indicating the coronavirus crisis is easing following a recent surge has also generated buying interest as countries around the world continue to ramp up vaccine rollouts.

The positive sentiment also came following last Friday’s drop by the CBOE Market Volatility Index, which closed below 20 for the first time in nearly a year.

The decrease by the closely watched volatility index suggests there is reduced fear in the markets following the spike seen in reaction to speculative trading in stocks like GameStop (GME).

Buying interest waned over the course of the morning, however, leading some traders to cash in on the recent strength in the markets.

In U.S. economic news, the Federal Reserve Bank of New York released a report showing New York manufacturing activity grew at its fastest pace in months in February.

The New York Fed said its general business conditions index climbed to 12.1 in February from 3.5 in January, with a positive reading indicating growth in regional manufacturing activity. Economists had expected the index to rise to 6.0.

With the much bigger than expected increase, the general business conditions index reached its highest level since hitting 17.0 last September.

A slew of economic data is due to be released in the comings days, including reports on retail sales, industrial production, housing starts, and existing home sales.

Sector News

Despite the lackluster close by the broader markets, many of the major sectors showed notable moves over the course of the session.

Substantial strength was visible among steel stocks, as reflected by the 3.1 percent spike by the NYSE Arca Steel Index. The index ended the session at its best closing level in a month.

Airline stocks also showed a significant move to the upside on the day, driving the NYSE Arca Airline Index up by 3 percent to a nearly one-year closing high.

Banking stocks also moved sharply higher, benefiting from a jump in treasury yields. The KBW Bank Index surged up by 3 percent to its best closing level in over a year.

Energy stocks also saw substantial strength. The rally by energy stocks came as the price of crude oil for March delivery climbed $0.58 to $60.05 a barrel after a winter storm shut down oil wells and refineries in Texas.

Reflecting the strength in the energy sector, the NYSE Arca Oil Index soared by 2.9 percent, while the Philadelphia Oil Service Index and the NYSE Arca Natural Gas Index jumped by 2.3 percent and 2.1 percent, respectively.

On the other hand, biotechnology stocks moved sharply lower on the day, dragging the NYSE Arca Biotechnology Index down by 2.6 percent.

Considerable weakness also emerged among gold stocks, resulting in a 2.6 percent nosedive by the NYSE Arca Gold Bugs Index.

The sell-off by gold stocks came amid a steep drop by the price of the precious metal, with gold for April delivery tumbling $24.20 to $1,799 an ounce.

Housing stocks also showed a significant move to the downside on the day, as reflected by the 2.5 percent slump by the Philadelphia Housing Sector Index.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Tuesday. Japan’s Nikkei 225 Index jumped by 1.3 percent, while Hong Kong’s Hang Seng Index soared by 1.9 percent.

Meanwhile, the major European markets turned in a lackluster performance on the day. While the French CAC 40 Index closed just above the unchanged line, the U.K.’s FTSE 100 Index edged down by 0.1 percent and the German DAX Index dipped by 0.3 percent.

In the bond market, treasuries moved sharply lower, driving the yield on the benchmark ten-year note to its highest closing level in almost a year. The yield on the ten-year note, which moves opposite of its price, jumped 9.9 basis points at 1.299 percent.

Looking Ahead

Trading on Wednesday may be impacted by reaction to reports on retail sales, producer prices, industrial production and homebuilder confidence. The Federal Reserve is also scheduled to release the minutes of its latest monetary policy meeting.