U.S. stocks concluded slightly higher after trading within a narrow range Tuesday after Federal Reserve Chairwoman Janet Yellen cautioned that the U.K. leaving the European Union posed a risk while new polls showed support for the “stay” camp growing.
The S&P 500 rose 5.65 points, or 0.3%, to close at 2,088.90, led by gains in energy and telecom shares. The index traded within an 11-point range on the session. Four of the S&P’s 10 sectors were in negative territory, with materials stocks leading the losses.
The Dow Jones Industrial Average which traded within a 78-point range, advanced 24.86 points, or 0.1%, to close at 17,829.73, led by a 2.2% gain by Microsoft Corp. and weighed by a 0.9% decline in Boeing Co. BA, -0.93%
Meanwhile, the Nasdaq Composite Index gained 6.55 points, or 0.1%, to finish at 4,843.76, after trading within a 26-point range.
In her testimony to the Senate Banking Committee, Yellen said a victory for the “leave camp” in this week’s U.K. referendum on membership in the EU would pose a significant risk to the U.S. economy and global financial market stability, and reiterated the cautious approach to raising interest rates that the Federal Open Market Committee signaled last week when it stood pat on U.S. interest rates.
“Our cautious approach…remains appropriate,” Yellen said Tuesday.
As stocks spent the session struggling to hold on to gains, the overall tone of the market was “nervousness and cautiousness,” said Phil Orlando, equity market strategist at Federated Investors.
Investors are “playing defense until [they] get some clarity” on a series of uncertainties looming over the market, most notably this Thursday’s referendum on a potential Brexit, the U.S. elections and the Fed’s next steps on monetary policy. That is partly why telecom, traditionally viewed as a safety play in times of market turmoil, was leading the market, Orlando added.
According to some analysts, Yellen’s testimony on Tuesday did little to offer a clear view on when the central bank could hike U.S. rates again.
“Bottom line, there is nothing new here that is any different than the FOMC statement and press conference last week,” said Peter Boockvar, chief market analyst at The Lindsey Group, in emailed comments.
Though policy makers “would love” to raise interest rates, Boockvar said, “they remain scared about the implications of higher rates on a fragile economy that remains very overindebted and [about] what higher rates will mean for asset prices.”
Meanwhile, investors continued to closely follow the most recent polls from the U.K., the latest of which showed a split vote, with a slight but statistically insignificant advantage for the “remain” vote, which got 45% of voters, while the “leave” vote got 44%. The poll’s margin of error was plus or minus 3.1 percentage points.
Two major forces behind the U.K. vote are younger people eager to travel and do business abroad, those in the “remain” camp, and people who are using the immigration issue as a reason to leave the EU, said Robert Pavlik, chief market strategist at Boston Private Wealth.
“It’s been seven years and people [in the U.K.] are looking for scapegoats,” said Pavlik. “They haven’t seen an improvement, see businesses and high-wage earners making money, but they’re muddling through, so immigrants become a scapegoat.”
Given a recent swing back to the “remain” camp in recent days, Pavlik expects a follow-through rally should Britons vote to remain in the EU.
Company news: Shares of home builder Lennar Corp. fell 1.1% even after the company posted better-than-expected quarterly earnings and revenue.
Used-car seller CarMax Inc. fell 4.9%, after the company’s profit and sales lagged estimates.
Sabre Corp. shares fell 2.3% after the travel software company said CEO Tom Klein plans to resign.
Facebook Inc. rose 0.9% after the tech company’s executives reiterated Monday their interest in entering China, while answering questions at the company’s annual shareholder meeting.
Source: MarketWatch
