Finance

Stocks open little changed as market tries to recover from Monday’s sharp drop

Stocks opened little changed on Tuesday as Wall Street attempted to rebound from a massive sell-off a day earlier while traders pored over news on dealmaking, earnings and the coronavirus.

The Dow Jones Industrial Average traded 19 points higher, or 0.1%. The S&P 500 was also up 0.1% and the Nasdaq Composite advanced 0.4%.

AMD said it was buying rival Xilinx in a $35 billion all-stock deal in a push for the data center market. Xilinx led chip stocks higher, gaining 12.3%. AMD shares dipped 1.7%.

A slew of large-cap companies reported quarterly earnings on Tuesday, including manufacturing giants 3M and Caterpillar. Caterpillar reported a steep drop in year-over-year earnings, sending the stock down more than 1%. 3M, meanwhile, dipped 1.7% even after posting stronger-than-expected earnings and revenue.

Wall Street is also gearing up for Microsoft earnings after the bell on Tuesday. The technology giant saw revenue grow 13% last quarter despite the pandemic. Advanced Micro Devices and Chubb also report following the close on Tuesday.

Stocks plunged on Monday, with the Dow logging its biggest one-day drop since early September. Fueling the weakness in the markets was a surge in Covid-19 cases in the U.S., compounded by diminishing hope of a stimulus package from Washington before the election, which is just one week away.

Friday and Saturday saw cases spike above 83,000, according to data from Johns Hopkins University. The data on Sunday also showed the country has reported a record average of 68,767 cases per day over the past seven days.

“This sell-off, whatever the rationale, was well-telegraphed. It was the consensus that we were going to have a pullback before the election. A number of strategists suggested it. Technical indicators indicated we were going to have it,” Quincy Krosby, Prudential Financial chief market strategist, told CNBC.

Wall Street is also monitoring coronavirus aid package negotiations. House Speaker Nancy Pelosi’s spokesperson said on Twitter that the Democratic leader remains “optimistic” about a pre-election deal after Monday’s phone call with Treasury Secretary Steven Mnuchin. However, the spokesperson said Democrats are still waiting on the White House to accept its language around Covid-19 testing and that “our progress depends on Leader McConnell agreeing to bipartisan, comprehensive legislation.” 

With the presidential election only a week away, Fundstrat Washington policy strategist Thomas Block told clients, “it looks like the clock has run out” on a second Covid-19 stimulus bill for now. Block also said the the period of time after a November election and before the beginning of the new Congress is “not very productive, especially if the election results in a change to lineup for the coming year.”

With less than a week of trading left in October, the Dow is down slightly for the month and the S&P 500 and Nasdaq are up 1.1% and 1.7%, respectively.

“The biggest risk appears to be the threat of a contested election and the country not knowing the winner of the Presidential election next Tuesday night,” Brian Price, Head of Investment Management for Commonwealth Financial Network, told CNBC.” I think that investors are taking some chips off the table or increasing their hedging positions in advance of what could be a tenuous period for risk assets.”

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