July 21, 2020 / 6:20 PM / 15 days ago

US STOCKS-Wall Street gains as investors bet on stimulus

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* Energy stocks on track for biggest jump since June 5

* Tesla loses ground after JPM downgrade

* Coca-Cola up on demand rebound

* Dow up 1.07%, S&P rises 0.72%, Nasdaq up 0.09% (New throughout, updates prices, market activity and comments; new byline, adds NEW YORK dateline)

By Stephen Culp

NEW YORK, July 21 (Reuters) - U.S. stocks rose on Tuesday as a rotation into economically sensitive cyclical stocks reflected optimism that Washington will deliver a new round of stimulus to sustain the U.S. economic recovery from a pandemic-induced recession.

Financial, industrial and energy stocks provided the biggest lifts to the bellwether S&P 500 and blue-chip Dow as investors pivoted back to cyclicals. A drop in tech shares capped the Nasdaq’s gains.

The S&P 500 moved into positive territory year-to-date, up more than 1%. The Nasdaq was up nearly 20% since Jan. 1, while the Dow was down more than 5%.

“It’s noteworthy, this willingness to look at value plays,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. “It suggests the market thinks the global economy is going to improve.”

“Ultimately it’s healthier for the market when cyclicals perform better,” Carlson added.

As new infections of COVID-19 surged in the United States, lawmakers on Capitol Hill wrestled to craft a new stimulus package with less than two weeks until the expiry of extended unemployment aid for millions of Americans.

“There’s a belief that the government is going to provide stimulus and an assurance that the support is going to continue,” said Carlson.

For its part, the 27-member European Union reached an agreement on a massive $857 billion pandemic recovery plan at the conclusion of a rocky, five-day summit.

The Dow Jones Industrial Average rose 284.45 points, or 1.07%, to 26,965.32, the S&P 500 gained 23.29 points, or 0.72%, to 3,275.13 and the Nasdaq Composite added 9.94 points, or 0.09%, to 10,777.03.

Of the 11 sectors in the S&P 500, all but tech were in the black.

Energy companies were up 5.9%, the largest daily jump since June 5, as crude prices climbed amid signs of rebounding demand.

Second-quarter reporting season rolled on, with 58 constituents of the S&P 500 having reported. Of those, 77.6% have come in above consensus, according to Refinitiv data.

But expectations have set a low bar. Analysts now see aggregate S&P 500 earnings for the April to June period having declined by 41.8% year-on-year, per Refinitiv.

Coca-cola Co shares gained 2.7% after the beverage maker beat earnings estimates and said demand is improving.

Defense industrial Lockheed Martin Corp topped quarterly consensus estimates and raised its full-year profit and resume estimates, sending its shares up 2.6%.

Tesla Inc fell 2.4%, retreating from Monday’s record closing high after JPMorgan Chase downgraded the electric car maker’s stock to “market perform.”

After the bell, United Airlines Holdings Inc is expected to post results for a quarter that was particularly challenging for commercial air carriers.

Advancing issues outnumbered declining ones on the NYSE by a 4.28-to-1 ratio; on Nasdaq, a 1.98-to-1 ratio favored advancers.

The S&P 500 posted 43 new 52-week highs and no new lows; the Nasdaq Composite recorded 116 new highs and 10 new lows.

Reporting by Stephen Culp; Editing by David Gregorio

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