U.S. stocks ended higher Tuesday, led by strong gains in the energy sector as the overall market reclaimed some lost ground from the previous day, when tech shares fell sharply.
Market participants also were anticipating the Federal Reserve’s two-day policy meeting, which started in the early afternoon. Investors are watching for signs that the central bank will take a more aggressive path toward normalizing monetary policy.
What did the main benchmarks do?
The Dow Jones Industrial Average DJIA, +0.47% advanced 119 points, or 0.5%, to 24,730, with shares of components Boeing Co. BA, +1.77% and Nike Inc. NKE, +1.66% helping to lift the blue-chip gauge.
The Nasdaq Composite Index COMP, +0.27% was up 20 points, or 0.3%, to 7,364. The S&P 500 index SPX, +0.15% picked up 4 points, or 0.2%, to 2,717, with the energy sector, up 1.1%, buoying the broad-market index. After the modest rebound, the tech-heavy Nasdaq is still up by 6.7% for the year, with the S&P 500 lagging behind at a 1.6% gain.
Tuesday’s action comes a day after a tech selloff weighed on the overall stock market, with the Dow falling 335.60 points, or 1.4%, to 24,610.91 on Monday, and turning negative for the year. The S&P 500 index SPX, +0.15% dropped 1.4% to 2,712.92, while the tech-laden Nasdaq slumped 1.8% to 7,344.24, for its biggest one-day percentage decline since early February.
What’s driving the markets?
The energy sector helped push stocks into positive territory after oil prices settled at the highest levels of the month. Concerns that growing tensions between Iran and Saudi Arabia, along with expectations for declining Venezuela crude production, could have a negative shock on supply helped lift oil futures. Nonetheless, this comes as the U.S. is expected to ramp up its shale drilling, complicating the outlook for energy prices.
The Fed, meanwhile, is expected to deliver an interest-rate hike on Wednesday, following the Federal Open Market Committee’s meeting. A faster pace of rate hikes can dent the attractiveness of assets perceived as riskier, such as stocks.
Some investors are expecting the Fed’s economic projections, or the dot plot, will show more policy makers leaning toward a more aggressive four rate increases instead of the three forecast going into the year. The meeting will also see Jerome Powell preside over his first press conference of his tenure as Fed Chairman.
But tech stocks extended a slide after Facebook logged its biggest one-day percentage decline since 2014 on Monday and shed nearly $40 billion in market cap, amid a firestorm over third-party access to users’ personal data. Those losses in turn weighed on other social-media stocks and on the technology sector, which has been the best-performing group this year.
Facebook’s shares continued their slide after reports that the Federal Trade Commission was looking into whether the tech giant violated the terms of a consent decree when the data of its users slipped into the hands of Cambridge Analytica, which participated in President Donald Trump’s election campaign.
There were also further rumblings about the potential for trade wars, after reports that Trump may hit China with $60 billion in annual tariffs by Friday. The European Union is expected to unveil plans for a digital tax on major U.S. tech companies this week.
Which stocks were in focus?
Oracle Corp. ORCL, -9.43% shares tumbled around 9.4% after the company’s quarterly earnings report and forecast disappointed Wall Street’s expectations over cloud-software growth.
Shares of Facebook FB, -2.56% fell 2.8%, off its lows of the day, posting its lowest close since September. Citing sources, The Wall Street Journal reported that the company’s security chief, Alex Stamos, is planning to step down.
Other social media stocks took a hit amid fears that fresh regulation could be introduced to restrict the use of private data. Twitter TWTR, -10.38% shares slumped 10.4%. The company also faces possible legal action from the Israeli government for not following requests to remove content linked to terrorism, Bloomberg News reported.
What are strategists saying?
“Even though U.S. shale production is rising rapidly, there are concerns over Iran — whether the president signs new sanctions right now — and concerns over Venezuela, which provides refined product. Whether there is an event that will keep Iran from exporting its oil, the market will price in any disruption of supply,” said Quincy Krosby, chief market strategist at Prudential Financial.
As far as the slump in technology stocks, she said: “The more egregious the data breach, the more likely you’re going to have regulation coming in. At some point, the regulators are going to deal with the tech names that deal with private data. The selloff was an indication that investors are prepared for this, and there will be a regulatory regime imposed on them,” Krosby said.
“We’ve seen volatility come back into markets. Stocks have become more of a two-sided trade. Markets do seem more comfortable at these levels, but it’ll probably take a month or two before things settle. We want to see more clarity with what’s actually going on with trade, with underlying economic data. Those things will cause the market to break out one way or the other,” said Shawn Cruz, senior markets specialist at TD Ameritrade.
How are other markets faring?
European stocks SXXP, +0.51% traded higher. Asian markets pared earlier losses, though Japan’s Nikkei benchmark NIK, -0.47% stood out with a drop of 0.5%.
Oil futures CLJ8, +2.19% moved higher, and the ICE U.S. Dollar Index DXY, +0.54% also gained. Gold futures GCJ8, +0.05% slipped.
