The major domestic equity indexes did their best to regain some lost ground on Tuesday, assisted by gains in the energy, technology and consumer discretionary sectors. This return to positive territory came after a sharp sell-off a day earlier on spiraling global trade tensions.
The energy sector was responsible for much of the day’s gains among the S&P 500’s 11 major sectors, rising 1.4 percent as Washington pushed allies to halt imports of Iranian crude, which lifted oil prices more than 2 percent.
The technology sector advanced after having slid on Monday upon conflicting statements from Trump administration officials on restrictions on foreign investment in technology firms. Apple, which chalked up a gain of 1.2 percent, ended a three-day losing streak.
Three of the four FANG stocks, momentum leaders in the S&P 500, also reversed course from Monday. Facebook gained 1.4 percent, Amazon was up 1.7 percent, and Netflix rose 3.9 percent. Only shares of Google parent Alphabet ended the day in negative territory, ending down 0.6 percent.
Shares of Lennar rose 4.9 percent as strong housing demand helped the company report better-than-expected quarterly earnings.
A Bloomberg report that Canada is preparing steel quotas and tariffs on China also may have eased investor worries by lending support to Trump’s negotiating tactics.
In their first day of trading after having been removed from the Dow Jones Industrial Average, General Electric rose 7.8 percent, the largest percentage gain on the S&P 500 and the stock’s largest one-day gain in more than three years. The company said it would spin off its healthcare business and divest its stake in oil-services company Baker Hughes.
S&P 500 financial index registered its twelfth consecutive session of declines, the sector’s longest-ever losing streak.
Harley-Davidson fell 0.6 percent after President Donald Trump threatened the company with higher taxes. Trump’s threat came in response to the company’s announcement on Monday that it would move production from the United States to its international facilities for some of its motorcycles shipped to the European Union.
Approximately 6.77 billion shares changed hands on the major domestic equity exchanges, as compared to the 7.28 billion share average for the past 20 trading days.
Consumer Confidence Falls
Consumer confidence declined in June as Americans pared expectations about the economy and incomes, according to figures Tuesday from the New York-based Conference Board, potentially signaling a slowdown in economic activity later this year.
The group’s index fell to 126.4 from an upwardly revised 128.8 in May., while the expectations index fell to 103.2, the lowest this year, from 107.2.
“While expectations remain high by historical standards, the modest curtailment in optimism suggests that consumers do not foresee the economy gaining much momentum in the months ahead,” said Lynn Franco, the Conference Board’s director of economic indicators.
Economic growth appears to have picked significantly early in the second quarter after hitting a soft patch at the start of the year. Gross domestic product estimates for the April-June period are as high as a 4.7 percent annualized rate. The economy grew at a 2.2 percent rate in the first quarter.
The rising tensions with our trade partners could have contributed to the dip in confidence. The cutoff date for the survey was June 15. The United States is engaged in tit-for-tat import tariffs with China, Mexico, Canada and the European Union.
The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, fell to 25.1 this month from 26.5 in May. This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with continued shrinking of labor market slack.
The labor market is viewed as being near or at full employment, with the unemployment rate at an 18-year low of 3.8 percent. But the tightening labor market has not spurred faster wage growth.
The Conference Board survey showed consumers a bit downbeat about their income prospects. The percentage of consumers expecting an improvement in their income fell to 18.8 percent in June from 21.4 percent in May. The share of those expecting a decrease rose to 8.7 percent from 8.0 percent last month.
Crude Prices Continue to Rise
The price of crude oil was higher on Tuesday, supported by production losses in Canada, Libya and from the Neutral Zone between Saudi Arabia and Kuwait, but under pressure from higher supply from elsewhere in OPEC and escalating trade conflicts.
Brent crude was up 45 cents at $75.18 a barrel, while West Texas intermediate gained 65 cents higher at $68.73.
Kuwait’s energy minister said on Tuesday crude production from jointly operated oilfields in the Neutral Zone shared with Saudi Arabia has halted due to technical issues. He told Kuwait’s parliament output would resume soon.
Meanwhile Eastern Libyan commander Khalifa Haftar’s forces have given control of oil ports to a separate National Oil Corporation (NOC) based in the country’s east.
The official state-owned oil company from the capital Tripoli, also called NOC, will no longer be allowed to handle that oil, in a move the Tripoli government said would increase tension and deepen division.
The output losses follow a move by OPEC and other oil producers last week to increase supply by around 1 million barrels per day (bpd).
Prices have reacted only modestly to the prospect of higher OPEC production, partly because supply has tightened significantly since 2017, and partly because it is not clear exactly how much extra oil will come on to the market or when.
Production problems at one of Canada’s largest oil sands facilities helped drive front-month U.S. crude to its highest premium above second-month futures since 2014.
Bank of America Merrill Lynch (BoAML) said Brent could rise to $90 a barrel by the second quarter of 2019.
However, BoAML said the effects of the global trade dispute between the United States and other major economies including the European Union and China were gradually taking effect.
In a sign of what may lie ahead for economic growth, the escalating trade fight has already led to sharp sell-offs in stock markets, especially in Asia.
“We estimate a demand drop of 44,000 bpd for every 1 percent drop in global trade,” BoAML said.