Dow snaps 6-day losing streak as investors weigh upbeat economic data

By Frances Yue and William Watts

Nasdaq gains more than 1%

U.S. stocks ended higher Tuesday, led by mega tech stocks, with data suggesting the economy remains resilient despite higher interest rates as investors approach the end of the second quarter and the first half of the year.

What happened

On Monday, the Nasdaq Composite led indexes lower, falling 1.2%, while the S&P 500 shed 0.5% and the Dow posted a fractional loss.

What drove markets

Stocks rose Tuesday after a run of mostly positive economic data, including readings on durable-goods orders, home sales, and consumer confidence.

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The S&P 500 index has fallen in five of the past seven sessions amid lingering concerns about an economic slowdown and some profit taking by fund managers before the end of the month and first half of the year in the wake of sturdy gains in certain sectors in 2023.

This coming Friday marks the end of the second quarter and first half of 2023. The Nasdaq has gained almost 16% in the quarter, and is on pace for its best first half in 40 years. The S&P 500 and Dow are on track to finish the quarter up about 10% and 5%, respectively.

"The last trading week of both the quarter and the half-year will usually result in some portfolio rebalancing, particularly given the strength of the megacap technology stocks so far this year," said Richard Hunter, head of markets at Interactive Investor.

"Indeed, the Nasdaq bore the brunt of this switch [Monday] as investors chose to take some profit after a strong run which has seen the tech index rebound strongly after a torrid [bad] 2022," Hunter added.

Still, as stocks bounce on Tuesday, Mark Lehmann, chief executive at JMP Securities, a Citizens company, said he expects more and more companies to think about 2023 as an opportunity.

The CBOE Volatility Index, a gauge of expected equity market volatility, recently dropped to its lowest level in more than three years, according to FactSet data. The index stands at around 13.8 on Tuesday, well below its long run average of 20. A subdued reading indicates investors are feeling optimistic.

Meanwhile, "you look at the rally even going into the end of the quarter, I think that kind of optimism is pervading the markets," Lehmann said.

See: The stock market is headed for a big first-half gain. What history says that means for the rest of 2023

Also helping risk appetite on Tuesday were comments from China's premier Li Qiang, who said the world's second-largest economy remains on track to achieve its annual growth target of around 5% and that Beijing would roll out policies to expand domestic demand and open markets.

Hong Kong's Hang Seng Index rallied 1.9% and industrial commodities, such as copper , moved higher.

However, fears that the Federal Reserve will keep borrowing costs higher for longer have weighed on sentiment.

The Fed is expected to raise its policy interest rate by 25 basis points to a range of 5.25% to 5.50% toward the end of July, and not to start reducing the rate until spring 2024, according to recent market pricing.

Economic data

Companies in focus

--Jamie Chisholm contributed to the report.

-Frances Yue

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06-29-23 0906ET

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