U.S. Stocks Drift Higher as China Takes Action to Bolster Economy
U.S. stocks edged higher on Tuesday, with the S&P 500 setting a new all-time high for the 41st time this year. The gains were modest, however, as investors digested a weaker-than-expected report on U.S. consumer confidence.
The Dow Jones Industrial Average also added to its record set the day before, while the Nasdaq composite gained 0.6%. The positive sentiment followed a slew of moves by the Chinese central bank to prop up the world's second-largest economy.
Chinese Stimulus Boosts Markets
Financial markets have been buoyed by the Federal Reserve's recent decision to lower interest rates. However, concerns about the struggling Chinese economy have remained a risk. In response, the Chinese central bank announced a broad set of measures to bolster its economy, including a reduction in the amount of reserves banks are required to keep.
This news sent Chinese stocks soaring, with indexes jumping over 4% in both Shanghai and Hong Kong. The coordinated moves were seen as encouraging by analysts, but questions remain about their effectiveness in boosting the Chinese economy.
U.S. Consumer Confidence Falters
Adding to the market's uncertainty was a report showing a decline in U.S. consumer confidence. The Conference Board's index of consumer confidence fell in September, instead of rising as economists had expected. This is a significant concern as consumer spending is the heart of the U.S. economy.
Mixed Signals from Corporate Earnings
Earnings reports from AutoZone and Thor Industries provided mixed signals about the health of the U.S. economy. AutoZone's stock slipped after the company reported weak sales growth, while Thor Industries rose despite a mixed profit report.
Smartsheet Acquired in $8.4 Billion Deal
One of the day's biggest winners was Smartsheet, which helps companies manage projects and automate workflows. The company's stock jumped 6.5% after Blackstone and Vista Equity Partners agreed to buy it in an all-cash deal valued at $8.4 billion.
Bond Yields Fall as Fed Rate Cut Expectations Rise
Treasury yields slipped following the weaker-than-expected consumer confidence report. Traders increased their forecasts for the size of the Federal Reserve's next interest rate cut, now betting on a 61% probability of a half-percentage-point reduction.
Nvidia Leads S&P 500 Gains
Nvidia's stock rose 4%, providing the biggest boost to the S&P 500 index. The chip company's stock had fallen sharply earlier this year, but lower interest rates have helped to dampen concerns about its valuation.
Global Markets Rise
Stock markets around the world also rose on Tuesday, with indexes in Europe and Asia gaining ground. The positive sentiment was driven by the Chinese stimulus measures and the prospect of lower interest rates in the United States.