Dow rises for the first day in three led by Apple
PUBLISHED 6 HOURS AGO UPDATED 4 MINS AGO
Yun Li
@YunLi626
CNBC.COM
Markets point to a lower open on growing worries of political unrest in Hong Kong
Stocks rose for the first day in three sessions on Tuesday as investors looked past the bond market's recession signal.
Dow Jones Industrial Average traded about 320 points higher, while the S&P 500 rose 0.4% and the Nasdaq Composite was 0.5% higher, led by Apple which jumped 1.5%.
The widely watched 2-year to 10-year yield spread narrowed to just 2.5 basis points on Tuesday, according to FactSet, with the curve at its flattest level since 2007. A yield-curve inversion has been a reliable recession indicator watched by the Federal Reserve as well as many market experts.
The Labor Department's consumer price index report showed inflation came in as expected last month. The yield curve continued to narrow after the report.
The Dow slumped nearly 400 points on Monday to fall back below 26,000, while the benchmark 10-year Treasury yield dipped to 1.63%. The market seems to be tracking bond yields lower.
Despite concerns about the yield-curve inversion, history shows stocks have another year-and-a-half to run typically before doom hits, based on data going back to 1978, according to Credit Suisse. Data show a recession comes in about 22 months on average after the curve inverts.
"I think there's a lot of fear embedded in the bond market," said Jim Paulsen, chief investment strategist at The Leuthold Group. The inverted yield curve "is the biggest risk right now. It's my number one worry but I think it's overdone. If economic reports continue to improve, then I think people will decide this doesn't look like a recession."
"The fact that we have negative yields around the world makes this somewhat a different signal. The fact we inverted on underheat rather than the normal inversion on overheat makes it somewhat different," Paulsen added.
The increasingly violent protests in Hong Kong and a crash in the Argentine peso also drove investors to perceived "safe haven" assets such as U.S. bonds, gold, and the Japanese yen.
Market sentiment was already fragile due to increasing signs that the world's two largest economies — the U.S. and China — are unlikely to quickly resolve their protracted trade war. The two countries will resume trade negotiations in Washington in early September.
China once again fixed its yuan midpoint at 7.0326 per dollar on Tuesday, the fourth consecutive session where the People's Bank of China set the figure at a level weaker than the psychologically 7-yuan-per-dollar level.
In corporate news, JD.com, Advance Auto Parts, and Elanco Animal Health are among some of the companies scheduled to report their latest quarterly results before the opening bell.
CDK Global, Adaptive Biotech, and Change Healthcare are among some of the companies set to report earnings after market close.