By Anna Isaac and David Benoit
U.S. stocks wavered between small gains and losses Monday with investors assessing the chances of fresh federal stimulus spending, the slowing pace of new coronavirus infections and escalating tensions with China.
The Dow Jones Industrial Average climbed 1.1%, or 297 points, buoyed by shares of Boeing and Caterpillar. The S&P 500 added 0.2%, after a week during which the benchmark index advanced 2.5%.
The Nasdaq Composite dropped 0.4%, dragged lower by shares of the big technology giants that have pushed the stock market higher since late March.
Investors are attempting to gauge whether steps taken by President Trump over the weekend to offer aid to American households will go into effect or potentially spur a new round of Congressional dealmaking.
Mr. Trump on Saturday directed the federal government to provide $300 a week in additional payments to the unemployed. That was one of four executive orders aimed at extending relief spending after the White House and lawmakers on either side of the aisle in Congress failed to reach an agreement on a broader stimulus package. The president's directives are facing criticism for not offering sufficient aid, and for potentially breaching congressional spending authority.
"The legal basis for Trump to do much here with executive orders is shaky. He won't get far," said Holger Schmieding, chief economist at Berenberg Bank.
Still, with the coming November elections, politicians are likely to work out a deal that offers aid to voters, he said. "It's highly likely to have a deal this week that extends support to the end of the year," Mr. Schmieding said.
Treasury Secretary Steven Mnuchin expressed hope during an interview on CNBC Monday that a compromise could be reached with Democratic leaders this week.
The U.S. also reported its lowest number of new coronavirus cases in nearly a week, as new infections in some parts of the country trended down. Economists pointed to the slowing new case numbers as a signal that moderate measures might make it possible to contain the virus, without again crimping economic activity severely.
The stimulus debates come as investors are turning their attention back to broader macroeconomic uncertainty, after weeks of focus on U.S. corporate earnings and which companies appear best placed to survive the crisis.
Last week, Citigroup's derivatives desk saw clients trading individual stocks three times as much as they traded indexes, a split they expect to revert to normal levels, said Dan Baranovsky, the head of Citi's North American equity derivatives and cash trading desk.
"Here we are coming out of a pretty important earnings and guidance season and people are going to focus on macro concerns, specifically stimulus," he said.
Energy, industrial and material stocks tied to broad economic hopes led the S&P 500 and the Dow industrials on Monday. Boeing added 4.6%, while Caterpillar gained 4.1%.
Class B shares of Warren Buffett's Berkshire Hathaway rose 0.7% after the sprawling enterprise reported results Saturday, writing down the value of its aerospace parts maker but also increasing its planned stock buybacks.
Brent crude, the international oil benchmark, rose 1.6% to $45.09 a barrel.
Worries remain that government actions around the world to fight the pandemic's impact will eventually fan inflation. The trading around that theme is accelerating, Mr. Baranovsky said.
Gold rose 0.7%, or $14.30 per troy ounce, to $2024.40, and silver climbed 6.2%, or $1.72, to $29.249 a troy ounce. Both metals had posted nine straight weeks of gains heading into this week and are up sharply for the year.
"They aren't in a bubble, they are part of the broader narrative of concern about inflation and currency debasement," Mr. Baranovsky said.
In bond markets, the yield on the benchmark 10-year U.S. Treasury ticked up to 0.571%, from 0.562% Friday.
Tensions are also escalating between the U.S. and China. China's foreign ministry said it will impose sanctions on 11 U.S. citizens, including Republican Sens. Ted Cruz and Marco Rubio, in retaliation for similar measures by Washington against Hong Kong and mainland Chinese officials.
"I'm not surprised we're seeing yo-yo like moves at the moment reflecting short-term developments like the sanctions," said Ella Hoxha, senior investment manager at Pictet Asset Management.
Talks scheduled between top U.S. and Chinese officials on Aug. 15 about the phase-one trade deal are viewed as crucial by investors, she said. "That's more important for markets than the sanctions, which seem much more of a tit-for-tat diplomatic spat rather than something with deep economic implications."
Tech stocks slumped broadly after their big rally this year, with stocks including Netflix, Facebook and Tesla off more than 2%.
The recent rollercoaster at Eastman Kodak continued as the government froze the planned loan the company was to get to pivot its operations to produce drug ingredients at its factories. Shares dropped nearly 30%, at one point falling below $10 from its recent $60 high.
Shares of Twitter rose 1.4%. The social-media company has had preliminary talks about a potential combination with the popular video-sharing app TikTok in the U.S., The Wall Street Journal reported Saturday. Microsoft, which has been viewed as the lead bidder, was the worst performer in the Dow industrials, down 2.4%.
Shares of Simon Property Group rose 7%. The largest mall owner in the U.S. has been in talks with Amazon.com to take over space left by ailing department stores for its fulfillment centers.
Casino operator MGM Resorts International surged 13% after Barry Diller's IAC/InteractiveCorp disclosed it had acquired a 12% stake, worth about $1 billion. Other casinos also rose on the investor's take that MGM would rebound from the coronavirus.
Overseas, Hong Kong's Hang Seng Index dropped 0.6%. Political tensions in the region continued to simmer as Jimmy Lai, the outspoken publisher of Hong Kong's widely read pro-democracy newspaper, was arrested Monday on suspicion of foreign collusion under a new national security law. That step marks an expansion of Beijing's crackdown on the former British colony.
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