S&P 500 gains modestly, warning of higher COVID-19 deaths curb recovery hopes

(Reuters) – The bellwether S&P 500 index inched higher on Tuesday, with fresh warnings of a possible higher death toll from the new coronavirus and plunging consumer confidence curbing investor hopes for a near-term economic revival as states began to relax restrictions enacted to halt the pandemic’s spread.

The Dow joined the S&P 500 in positive territory but the Nasdaq was in the red, weighed down by technology stocks.

The S&P 500 is now within 15{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of its all-time high set in February, with the Dow and the Nasdaq now about 18{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} and 12{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, respectively, from their February records.

“The market seems to be resilient but I don’t know how much longer that will last,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “It’s a question of time before the market pulls back. The notion that this is going to be V-shaped recovery is fading.”

Smaller companies have fared better than their larger counterparts in recent days, as they stand to reap more benefits from the state-by-state easing of shutdown restrictions. The Russell 2000 , which tracks small-cap companies, was on course for its fifth straight advance.

But with U.S. coronavirus cases topping 1 million, a predictive model often cited by White House officials warned the U.S. coronavirus death toll could climb higher than previously projected if states reopen prematurely.

First-quarter earnings season has shifted into high gear with 3M Co (MMM.N) and PepsiCo PEP.N, among others, posting results, and Alphabet Inc (GOOGL.O), Starbucks Corp (SBUX.O) and Ford Motor Co (F.N) due after the bell.

First-quarter S&P 500 earnings are expected to be down 14.8{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} from a year ago, a dramatic U-turn from the 6.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} year-on-year growth seen on Jan. 1, according to Refinitiv data.

The U.S. Federal Reserve convenes its two-day monetary policy meeting to contend with crushing joblessness and an ailing economy.

On the economic front, consumer confidence plunged in April, with the ‘current conditions’ component suffering its largest drop ever, according to the Conference Board.

“Consumer confidence goes hand-in-hand with spending, and the consumer leads the economy,” Cardillo added.

The Dow Jones Industrial Average .DJI rose 90.97 points, or 0.38{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, to 24,224.75, the S&P 500 .SPX gained 6.58 points, or 0.23{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, to 2,885.06 and the Nasdaq Composite .IXIC dropped 39.42 points, or 0.45{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, to 8,690.74.

Of the 11 major sectors in the S&P 500, eight were in the black, led by energy .SPNY and industrials .SPLRCI.

Healthcare stocks .SPXHC dropped 1.3{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}. Merck & Co (MRK.N) warned of a $2.1 billion hit to its 2020 revenue. The drugmaker’s shares were down 2.6{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

3M, manufacturer of highly sought-after N95 protective masks, reported better-than-expected quarterly profit, sending its shares up 2.2{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

Harley-Davidson Inc (HOG.N) shares jumped 14.1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} after the motorcycle maker took steps to boost its cash reserves to contend with dropping demand due to lockdowns.

PepsiCo rose 1.5{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, benefiting from rising snack demand amid stay-at-home orders.

Caterpillar Inc (CAT.N) reported a steeper-than-expected first-quarter loss but still said its financial position remained “strong,” sending its shares up 1.1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

Advancing issues outnumbered declining ones on the NYSE by a 3.14-to-1 ratio; on Nasdaq, a 1.72-to-1 ratio favored advancers.

The S&P 500 posted 12 new 52-week highs and 1 new lows; the Nasdaq Composite recorded 51 new highs and 2 new lows.