Stocks rallied on Tuesday to break a five-day losing streak for the blue chips. There was no specific catalyst for the rebound, although technical factors seem to be in play: Large-cap stocks made a picture perfect bounce off of their 200-day moving average.
A 1.2% rise in crude oil lifted spirits as well.
Also contributing was efforts by Chinese authorities overnight to stabilize their markets after the Shanghai Composite suffered its worst one-day fall since the financial crisis. Even though the Shanghai Composite lost 1.7%, the worst of the day’s losses were cut.
In the end, the Dow Jones Industrial Average gained 1.1%, the S&P 500 gained 1.2%, the Nasdaq Composite gained 1%, and the Russell 2000 gained 0.8%.
Short covering seems to be the theme of the day, with strength in recently beaten down areas such as industrial metals, semiconductors, machinery, biotechnology and energy. Oil and gas stocks led the way with a 3% gain (the best one-day gain since February) followed by materials, which climbed 2.2%.
The economic calendar was light ahead of the conclusion of the Federal Reserve’s latest policy meeting tomorrow. After the Fed re-released staff projections that were mistakenly leaked in late June, expectations are high that the central bank will move to raise interest rates at its September policy meeting for the first time since 2006.
Michala Marcussen at Societe Generale expects the policy announcement Wednesday to be fairly uneventful as the Fed is unlikely to drop any definitive hints about a September liftoff — preferring instead to remain “data dependent” and leaving itself some flexibility should the situation in China prove destabilizing globally.
There were, however, a few items worth mentioning.
Consumer confidence dropped to the lowest level since last September, a 10-month low, suggesting retail spending could slow in the months to come. The expectations component led the weakness reflecting a sudden pessimism about the jobs outlook.
United Parcel Service, Inc. (NYSE:UPS) jumped 5.1% after reporting better-than-expected earnings (although revenues missed expectations. Twitter Inc (NYSE:TWTR) was vascillating wildly after hours, with Wall Street unsure what to do with its second-quarter earnings report.
Aside from the Fed tomorrow, earnings from Facebook Inc (NASDAQ:FB) are on deck for after the close. Since the company reported Q1 results on April 22, FB shares are up nearly 12% vs. a 1% decline for the S&P 500, so expectations are high. Back then, the company reported a 17% jump in its daily active users to 936 million on average.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
