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By Stephen Culp
NEW YORK, July 21 (Reuters) - The S&P 500 edged higher on Tuesday as investors rotated into economically sensitive cyclical stocks, optimistic 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 gave the biggest boosts to the bellwether S&P 500 and blue-chip Dow as investors pivoted back to cyclicals. A drop in tech shares pulled the Nasdaq lower.
“Economically sensitive areas are doing very well today,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia. “My guess is it’s because of the stimulus here and in Europe and decent earnings reports from a variety of different companies.”
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.
“A pick-up in demand is being seen throughout the economy as things have opened up,” Tuz added. “We’re at the cusp of continuing with the recovery or stagnation.”
Elsewhere, 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.
Unofficially, the Dow Jones Industrial Average rose 159.81 points, or 0.6%, to 26,840.68, the S&P 500 gained 5.47 points, or 0.17%, to 3,257.31 and the Nasdaq Composite dropped 86.73 points, or 0.81%, to 10,680.36.
Energy companies enjoyed their 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 advanced 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 revenue estimates, sending its shares higher.
Tesla Inc retreated 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.
Reporting by Stephen Culp; Editing by David Gregorio