Stocks extended gains on Tuesday, with equities steadying following concerns over the path forward for monetary policy.
The S&P 500 advanced to end within striking distance of a record high. The Dow also added to gains, a day after the 30-stock index jumped by the most since March. The Nasdaq reached a record intraday and closing high.
Cryptocurrency prices were broadly lower as concerns over tighter regulatory actions from China continued to weigh, and tokens from Bitcoin (BTC-USD) to the meme-based Dogecoin (DOGE-USD) added to recent losses. Bitcoin prices fell below $30,000 and erased year-to-date gains at their intraday lows.
Tuesday's session saw traders turn back toward tech stocks, with "reopening" stocks in the travel industries including airlines and cruise lines slumping after the Federal Reserve's increased inflation outlook raised concerns that higher prices would ultimately weigh on the economic recovery. According to some traders, now that the Fed has signaled it would move to stem fast-rising inflation, some of the longer-term allure of the cyclical trade may be lifted.
"I think the question is going to be here is, we were priced very dovishly going into the Fed. We appear to now be priced quite hawkishly. Clearly, the right outcome is somewhere in the middle," Stuart Kaiser, UBS head of equity derivatives research, told Yahoo Finance. "So will energy benefit from a rebalancing of those expectations? Potentially. I think right now though, what we're seeing is people are readjusting their expectations, a little bit less excited about those, quote, unquote, 'reflation' sectors and maybe focused a little more on tech at the moment."
Others offered a similar view.
"One of the things we've been watching very closely is which way inflationary pressure would tip some of the growth stocks," Ann Berry, Wheelhouse chief investment officer, told Yahoo Finance on Monday. "What we've seen today, which is the upward movement again on the Nasdaq, the upward movement again on some of the key technology stocks ... is very much in keeping with what we would have expected – which is, as folks look where to put their capital in a rising inflation environment, this return to growth feels natural."
"We're really looking now as people come out with announcements on what the second half of the year looks like, we're looking at what new business models are likely to persist going into this post-COVID environment," she added.
With second-quarter earnings season ramping up over the next couple of weeks, investors are also gearing up for a potentially repeat performance of strong corporate profit results, with earnings turbo-charged by vaccinated, savings-laden consumers eager to go out and spend. So far, analysts are looking for S&P 500 earnings to grow by 61.9% year-on-year in aggregate, according to FactSet data – an estimate UBS's Kaiser said may still be "need to be revised higher."
"I continue to believe that earnings are going to outperform. Expectations are getting better and better managed. But if you look at the blowout first quarter we had, I think there's enough momentum to continue that, which are going to make stocks an interesting investment throughout the year," Mitch Roschelle, Macro Trends Advisors LLC Founding Partner, told Yahoo Finance. "There likely will be a correction somewhere during the year, because there always is, but right now going into earnings season, I see tailwinds and not headwinds."
4:04 p.m. ET: Stocks post back-to-back sessions of gains, Nasdaq sets fresh record high
Here were the main moves in markets as of 4:04 p.m. ET:
S&P 500 (^GSPC): +21.65 (+0.51%) to 4,246.44
Dow (^DJI): +68.61 (+0.20%) to 33,945.58
Nasdaq (^IXIC): +111.79 (+0.79%) to 14,253.27
Crude (CL=F): -$0.58 (-0.79%) to $73.08 a barrel
Gold (GC=F): -$5.90 (-0.33%) to $1,777.00 per ounce
10-year Treasury (^TNX): -1.2 bps to yield 1.4720%
12:26 p.m. ET: Nasdaq hits record high as tech stocks outperform
The Nasdaq Composite rose more than 0.5% to reach a record intraday high Tuesday afternoon as technology stocks outperformed. Almost all of the Big Tech FAANG stocks advanced strongly, with Google's parent company Alphabet the notable exception. Amazon shares were higher by more than 1.5%, with the company's annual Prime Day sales extravaganza under way.
The consumer discretionary and information technology sectors outperformed in the S&P 500, while utilities and real estate were in the red. Nike and Home Depot outperformed in the Dow.
11:58 a.m. ET: Fed Chair Powell set to highlight strengthening economy but ongoing 'risks' to outlook from pandemic in congressional testimony later Tuesday
Federal Reserve Chair Jerome Powell is set to address the U.S. House of Representatives' Select Subcommittee on the Coronavirus Crisis starting at 2 p.m. ET on Tuesday.
Powell is set to strike a balance between highlighting economic improvement and noting the risks still lingering due to the pandemic, according to prepared remarks released ahead of the event. These remarks are set to reaffirm the stance Powell took just last week in delivering his post-FOMC meeting press conference. In those, the central bank leader urged market participants to take the Fed's projection materials – which suggested two rate hikes by year-end 2023 — as only speculation based on current conditions.
"Since we last met, the economy has shown sustained improvement," Powell said in the remarks, while adding that, "As with overall economic activity, conditions in the labor market have continued to improve, although the pace has been uneven."
"The pandemic continues to pose risks to the economic outlook," according to the remarks. "The pace of vaccinations has slowed and new strains of the virus remain a risk. Continued progress on vaccinations will support a return to more normal economic conditions."
10:00 a.m. ET: Existing home sales fell for a fourth straight month in May
Existing home sales fell for a fourth consecutive month last month as tight inventory levels and rising prices weighed on housing market activity.
Sales of previously owned homes were down 0.9% in May over April to reach a seasonally adjusted annualized level of 5.8 million, according to the National Association of Realtors' monthly report. This was less steep than the 2.1% decline expected, based on Bloomberg data. In April, existing home sales fell 2.7%.
9:30 a.m. ET: Stocks open slightly lower
Here's where markets were trading just after the opening bell:
S&P 500 (^GSPC): -1.90 (-0.04%) to 4,222.89
Dow (^DJI): -28.69 (-0.08%) to 33,848.28
Nasdaq (^IXIC): +0.59 (+0.00%) to 14,141.71
Crude (CL=F): -$0.38 (-0.52%) to $73.28 a barrel
Gold (GC=F): -$5.00 (-0.28%) to $1,777.90 per ounce
10-year Treasury (^TNX): +2.4 bps to yield 1.509%
9:15 a.m. ET: Bitcoin dives below $30,000 as regulatory concerns out of China drag on crypto
Bitcoin prices fell more than 7% to briefly trade below $30,000, according to Yahoo Finance data. The drop added to a recent slump over the past several sessions, with concerns over a regulatory crackdown out of China weighing on Bitcoin, Ethereum and other cryptocurrency prices. Bitcoin, the largest cryptocurrency by market capitalization, came within about $500 of erasing year-to-date gains, after entering 2021 just above $29,000.
Earlier this week, the People's Bank of China, or China's central bank, said it convened a meeting with some of the country's largest banks to urge the firms to enforce bans on cryptocurrency trading and other services. This added to concerns for crypto holders after reports last week suggested a major Chinese city was planning to shut down all Bitcoin and Ethereum mining operations within a year.
7:50 a.m. ET: GameStop completes sale of 5 million shares, raising over $1 billion
The company had disclosed on June 9 that it planned to sell 5 million shares of common stock in an at-the-market share sale.
Proceeds from the offering will be used "for general corporate purposes as well as for investing in growth initiatives and maintaining a strong balance sheet," according to the video game retailer.
7:21 a.m. ET Tuesday: Stock futures hold higher, heading toward a positive open
Here's where markets were trading Tuesday morning:
S&P 500 futures (ES=F): 4,218.75, +5 points (+0.12%)
Dow futures (YM=F): 33,782.00, +21 points (+0.06%)
Nasdaq futures (NQ=F): 14,164.50, +34.5 points (+0.24%)
Crude (CL=F): -$0.51 (-0.69%) to $73.15 a barrel
Gold (GC=F): +$3.30 (+0.19%) to $1,786.20 per ounce
10-year Treasury (^TNX): -0.1 bps to yield 1.4840%
6:12 p.m. ET Monday: Stock futures add to gains
Here's where markets were trading Monday evening:
S&P 500 futures (ES=F): 4,218.75, +5 points (+0.12%)
Dow futures (YM=F): 33,802.00, +41 points (+0.12%)
Nasdaq futures (NQ=F): 14,140.5, +10.5 points (+0.07%)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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