Wall Street rises with economic hopes; bank stocks jump

(Reuters) – U.S. stocks rose on Wednesday, with the S&P 500 closing above 3,000 for the first time since March 5, as the further easing of lockdowns lifted optimism for an economic recovery.

Bank stocks powered the day’s advance, with the S&P 500 financial index .SPSY leading gains among major sectors. The index rose nearly 10% over the past two sessions for its biggest two-day increase since April 8-9.

JPMorgan Chase & Co (JPM.N) was the leading point gainer in the financial index, rising 5.8% as the stock surged for a second day in a row. The bank’s chief executive, Jamie Dimon, said Tuesday he expects JPMorgan will boost its credit reserves again in the second quarter, but said there are signs the economy is regaining its footing.

After-the-bell on Wednesday, the head of JPMorgan’s corporate and investment banking division said second-quarter revenues are on track to be more than 50% higher than the same period last year.

Continued easing of lockdowns, optimism about an eventual COVID-19 vaccine and massive U.S. stimulus have been driving the market’s recent gains. On Wednesday, Walt Disney Co (DIS.N) announced plans to begin reopening its Walt Disney World resort in Florida, the world’s largest theme park, in phases beginning July 11, and MGM Resorts (MGM.N) said it would reopen its four Las Vegas casinos on June 4.

“It’s all about liquidity and the hopes that the economy will eventually do well,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

“The rally will continue, but I don’t think it will continue without pullbacks,” he said, noting that weak second-quarter earnings could give investors a “reality check.”

Tech-related shares underperformed the broader market on Wednesday after leading the recent rally.

The Dow Jones Industrial Average .DJI rose 553.16 points, or 2.21%, to 25,548.27, the S&P 500 .SPX gained 44.36 points, or 1.48%, to 3,036.13, and the Nasdaq Composite .IXIC added 72.14 points, or 0.77%, to 9,412.36.

Amid the recent gains, U.S. tensions with China have cast a cloud on markets.

President Donald Trump said Tuesday that Washington would announce its response to China’s planned national security legislation on Hong Kong before the end of the week. Secretary of State Mike Pompeo said Wednesday that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, potentially a big blow to its status as a major financial hub.

Tech-related shares are among the most sensitive to Chinese growth, said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in St. Louis.

“If the market is going to go higher from here, you’re going to have to have broader participation, but you are going to need those large-cap tech companies to be along for the ride because they make up such a large portion of the benchmark,” Samana said.

Also on Wednesday, the Federal Reserve’s Beige Book report showed that U.S. businesses continued to be hammered by the effects of the novel coronavirus epidemic into the middle of May.

Advancing issues outnumbered declining ones on the NYSE by a 3.81-to-1 ratio; on Nasdaq, a 2.21-to-1 ratio favored advancers.

The S&P 500 posted seven new 52-week highs and no new lows; the Nasdaq Composite recorded 41 new highs and 10 new lows.

Volume on U.S. exchanges was 12.86 billion shares, compared to the 11.33 billion average for the full session over the last 20 trading days.

(This story has been refiled to delete extraneous words in 3rd paragraph)

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American Airlines CEO quells U.S. bankruptcy talk, says demand improving

(Reuters) – American Airlines Group Inc (AAL.O) is not considering a Chapter 11 bankruptcy filing, Chief Executive Doug Parker said on Wednesday and dismissed speculation that a major U.S. carrier could disappear due to the coronavirus pandemic.

“Bankruptcy is failure. We’re not going to do that,” Parker told a conference, adding: “I don’t think you’ll see any airline go by the wayside as a result of this crisis.”

Shares in American rose 5.5% in late trading.

The U.S. airline industry is expected to be 10% to 20% smaller in the summer of 2021, Parker said, and its recovery would depend on how passenger demand and revenues evolve.

Earlier this month, Boeing Co (BA.N) Chief Executive Dave Calhoun told NBC he thought that a major U.S. carrier could go out of business in the fall, when government payroll aid for airlines will expire.

U.S. airlines, suffering an unprecedented downturn in air travel because of the pandemic, have warned they may need to eliminate jobs after Oct. 1 but Parker said the company aimed to avoid furloughs.

Nearly 40,000 of its more than 100,000 employees have opted for an early retirement, reduced work schedule or temporary leaves, he said.

American’s revenues are down by about 90% due to the outbreak, but demand is improving and net receipts have been in positive territory for the past 2-1/2 weeks after a period when airlines were receiving more cancellations than new bookings.

“More and more people are feeling more comfortable today, but we need to get to a point where all Americans are as comfortable flying as they should be,” he said.

American’s planes were about 56% full over the long U.S. Memorial Day weekend, albeit in drastically reduced capacity, he said. American is flying about 20% of its normal schedule.

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U.S. businesses slammed by pandemic but see some green shoots, Fed says

(Reuters) – U.S. businesses continued to be hammered by the effects of the novel coronavirus epidemic in the United States into the middle of May, a Federal Reserve report showed on Wednesday, and few expected a swift recovery despite some signs of hope.

The sharp plunge in economic activity recounted in the U.S. central bank’s latest temperature check of business activity across its 12 districts shed light on the depth of the economic pain generated by the virus, which has led to an unprecedented downturn and a U.S. death toll approaching 100,000.

The Fed’s survey, known as the “Beige Book,” was completed mostly in April, when non-essential businesses were shut down in much of the country, through May 18, when some states had started to loosen restrictions.

“Economic activity declined in all districts – falling sharply in most,” the Fed said in its report. “Although many contacts expressed hope that overall activity would pick up as businesses reopened, the outlook remained highly uncertain and most contacts were pessimistic about the potential pace of recovery.”

The Fed has acted aggressively to bolster the economy to try to mitigate the effects of the widespread business closures and a surge in job losses. The central bank cut its key overnight interest rate to near zero in March, launched a round of open-ended asset purchases and announced a slate of emergency lending tools to support businesses and households.

Congress has also passed nearly $3 trillion in economic relief to funnel funds to individuals and businesses hurt by the pandemic. But uncertainty remains about how scarred businesses will be, despite an easing in lockdown restrictions.

More than 38 million Americans have filed for unemployment benefits over the past two months, and the U.S. unemployment rate soared to 14.7% in April.

The collection of anecdotes from the Fed’s districts showed many firms felt the worst of the crisis was behind them, and the hard-hit New York district said there were scattered reports of a nascent pickup in economic activity in early May.

But the report also made clear most businesses were still grappling with the fallout, even with an easing of restrictions.

“Contacts cited challenges in bringing employees back to work, including workers’ health concerns, limited access to childcare, and generous unemployment insurance benefits,” the Fed said.

Some of those jobs in the most affected industries such as leisure, travel and hospitality are unlikely to swiftly return and other businesses are navigating how to accommodate social distancing requirements, which could mean fewer customers. Consumer confidence also remains low.

“Contacts are uncertain how fearful consumers will be while the COVID-19 threat remains and how freely consumers will spend after the threat lifts,” the Fed’s contacts in the Philadelphia district noted, referring to the respiratory disease caused by the novel coronavirus.

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Asian stocks pull back as Hong Kong uncertainty weighs

NEW YORK (Reuters) – Asian shares shed some of their recent gains on Wednesday as investor concerns about rising tensions between the United States and China tempered optimism about a re-opening of the world economy.

U.S. President Donald Trump said late on Tuesday he is preparing to take action against China this week over its effort to impose national security laws on Hong Kong, but gave no further details.

Worsening relations between the world’s two biggest economies will further hobble global growth, already in the doldrums due to the coronavirus pandemic worldwide.

E-Mini futures for the S&P 500 edged down 0.05%, just short of the 3,000 chart level. The index had cleared 3,000 points in Wall Street overnight before pulling back, as some traders returned to the New York Stock Exchange floor for the first time in two months.

The Nikkei share average slipped 0.1%, unwinding some of the gains made on Tuesday when it climbed to their highest in nearly 12 weeks. Australia’s ASX 200 lost 0.9% in early trade and South Korea’s KOSPI fell 0.2%.

Graphic: Asian stock markets – here

“The S&P500 looked to be set to close above 3,000 until the late headline that the United States was considering a range of sanctions on Chinese officials and businesses should China go ahead with its legislation regarding Hong Kong,” analysts at the National Australia Bank said in a note.

“The extent of those possible sanctions is uncertain,” the analysts said.

China’s plans to impose national security laws in Hong Kong have triggered the first big street unrest in the Asian financial hub for the first time since last year. Overnight, hundreds of riot police took up posts around Hong Kong’s legislature in anticipation of protests on Wednesday.

Indeed, some analysts warned that even the recent jump in share prices showed signs of caution.

“Stock buying in the last 24 hours has a strong defensive bent,” Michael McCarthy, chief market strategist at CMC said in a note. “Beaten down consumer and financial stocks are leading markets higher, at the expense of the previously popular tech and healthcare sectors.”

Moderating demand for risk helped the safe-haven U.S. dollar index to edge up 0.03% to 99.042, reversing from losses overnight.

U.S. Treasury yields retreated from levels struck overnight, with two-year yields hovering at 0.170%, up from a record low of 0.105% struck on May 8, but still under 0.20%.

Gold prices rebounded from losses as some investors played it safe, with spot gold unchanged at $1,711.45 per ounce.

The retreat from risk led oil prices to give up earlier gains. U.S. West Texas Intermediate crude futures were down 0.3%.

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Italy's RCS says it may win damages in dispute with Blackstone after ruling

MILAN (Reuters) – Milan’s Arbitral Tribunal has judged that the contracts over the sale of Italy’s RCS (RCSM.MI) headquarters to Blackstone Group Inc (BX.N) in 2013 were valid but found that the purchaser’s behaviour may entitle the Italian publisher to compensatory damages, RCS said on Tuesday.

The case centres on the ownership of RCS’s historic headquarters in central Milan, which Blackstone bought from RCS for 120 million euros ($131.71 million).

RCS, owner of newspaper Corriere della Sera, launched arbitration proceedings in Milan in 2018 to nullify the sale, saying Blackstone took control of the headquarters at too low a price, while RCS faced financial difficulties. It asked that the transaction be annulled.

Blackstone in turn has accused RCS of falsely claiming that it still owns the property and of improperly blocking it from selling it to Germany’s Allianz SE (ALVG.DE).

The U.S. investment firm filed two lawsuits in New York, one against RCS and the other directly against RCS’s chairman and controlling shareholder, Urbano Cairo. They were put on hold last year pending the outcome of the arbitration in Italy.

The Arbitral Tribunal ordered two expert witnesses to report separately on the condition of RCS in 2013 and on the market value of the property, the Italian company said on Tuesday.

This is a partial and nondefinitive decision and the arbitration proceeding continues, RCS added in its statement.

A Blackstone representative said the company was “pleased that in this ruling, the arbitrators have dismissed the overwhelming majority of RCS’ claims, and have confirmed the validity of the contract in which RCS sold the building in 2013.”

The sale followed a year-long, fully transparent auction process, it was approved by RCS’s board and auditors, and was supported by a leading Italian bank, Blackstone said, adding it will continue to seek “compensation for the meaningful and growing damages caused by RCS.”

($1 = 0.9111 euro)

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'How about next June?' Small meat processors backlogged as virus idles big plants

CHICAGO/WINNIPEG, Manitoba (Reuters) – Inside the small-scale Iowa abattoir Stanhope Locker and Market, owner Shaunna Zanker yawns with exhaustion as she listens to yet another farmer asking her to slaughter his pigs.

“I’m so sorry, but we’re booked through March of next year,” Zanker said on the phone. “How about next June?”

Slaughter operations like Zanker’s are booming as novel coronavirus outbreaks at major U.S. and Canadian meat plants force farmers and meat-loving consumers to seek out alternatives to a crucial supply-chain link.

Since 1946, this Stanhope, Iowa, shop – one of 1,500 independent American slaughterhouses – has processed a few farm animals from local farms each week and sold cuts of beef and pork to the public.

Now the family-owned business and others like it are overwhelmed and are forced to turn away farmers. Large meat plants across the United States and Canada are closed or running at reduced capacity. The result: not enough places to slaughter hundreds of thousands of cattle and pigs, and store shelves with little or no meat in major exporting countries that normally have abundant supplies.

Small-scale slaughterhouses account for a miniscule part of the market: Around 80% of U.S. beef is produced by four large companies. Some 1% of American hogs or less are processed at small-scale meat lockers, economists say.

The consumer rush for meat is straining supplies at TL Keller Meats in Litchfield, Ohio, and forced them for the first time ever to ration sales: Five pounds (2.3 kg) of ground beef per person and two packs of burger patties per family.

Owner Tom Keller and his 23 employees are processing as fast as they can. In March, they slaughtered 104 cattle, twice the rate a year earlier.

“People are going mad trying to fill their freezers,” Keller said after putting in a 13-hour day.


North of the border, Canada’s main cattle-producing province, Alberta, is struggling to deal with reduced production at the country’s two main beef plants, owned by Cargill Inc [CARG.UL] and JBS SA (JBSS3.SA), both in the province.

The farms where cattle are raised to slaughter-ready weight, known as feedlots, are being turned away by the big plants, which have a backlog of cattle.

So some are calling Marc Lustenberger, owner of the Meat Chop abattoir near Penhold, Alberta, who already has a brisk business cutting meat for farmers to sell directly to consumers.

“There’s lots of panic buying,” Lustenberger said. “Looks like it’s not going to stop anytime soon.”

In March and April, Alberta’s Red Deer Lake Meats slaughtered twice as many pigs and cattle as it normally does. The provincial agriculture department called Red Deer butcher Darrel Barrett to ask him to pick up some of the slack from the two-week closure of Cargill’s plant.

“Which is absurd, with Cargill slaughtering 4,500 head a day,” Barrett said. “We’re lucky if we do 20 a week.”

Like other Alberta butchers, Barrett is also busy cutting meat for farms that are suddenly doing booming sales directly to consumers.

One customer, rancher Ben Campbell of Black Diamond, Alberta, pre-sold 10,800 pounds (4,900 kg) of grass-fed beef in two months, one-third more than he sold all of last year.

Small ranchers like Tim Hoven, who runs an organic beef farm near Eckville, Alberta, have years-long relationships with small butchers that are now seeing massive demand. Neighbors, used to delivering to the big plants, are left with cattle that have nowhere to go.

“They’re in a tough spot because they’re small and they’re at the bottom of the list to get that kill spot at these big plants,” said Hoven, whose meat sales have tripled.

“They can’t get that spot at the small plants” either.


At Uniontown, Alabama-based BDA Farm, sales have jumped more than 800% in two months, said partner Allen Williams.

“Initially it was panic buying, but it has gone far beyond that now,” Williams said. “They’re discovering an entirely new way to buy food and they’re discovering it’s pretty dad-gum convenient.”

“We’re selling out of absolutely everything, every single week. But we’re running into a choke point – we can’t get it all processed.”

Back in Iowa, Zanker hangs up the phone. It’s the 10th farmer to call that day.

Next, a woman calls asking if Stanhope Locker and Market has meat for sale. They do. The woman lives two hours away. Others have driven further, Zanker said.

“I had one person call, telling me they had gotten a hog for free,” Zanker said. “I told them, ‘There’s nowhere to take them. Congratulations, you now have a pet.’”

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Japan shares scale 10-week peak, S&P 500 up sharply

SYDNEY (Reuters) – Asian shares forged ahead on Tuesday while U.S. stock futures breached a major chart barrier as investors brushed past Sino-U.S. trade tensions to more stimulus in China and a re-opening world economy.

Japan’s Nikkei .N225 took the lead with a rise of 1.7% to its highest since early March when the economic impact of the coronavirus was just becoming clear.

MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 1.6%, while South Korea .KS11 rose 1.5%.

E-Mini futures for the S&P 500 climbed 2% to clear the 3,000 chart level. EUROSTOXX 50 futures added 0.98% and FTSE futures 2.2%.

Chinese blue chips .CSI300 firmed 0.8% after the country’s central bank said it would strengthen economic policy and continue to push to lower interest rates on loans.

While largely reiterations of past comments, they helped offset the war of words between Washington and Beijing over trade, the coronavirus and China’s proposals for stricter security laws in Hong Kong.

“U.S.-China tensions continue to simmer in the background, but equity investors appear more interested on the prospect of economies reopening around the globe,” said Rodrigo Catril, a senior FX strategist at NAB.

“On this score, Japan ended its nationwide state of emergency, Spaniards have returned to bars in Madrid wearing masks and England will reopen some businesses on June 1.”

There were reports Tuesday that Germany wants to end a travel warning for tourist trips to 31 European countries from June 15 if the coronavirus situation allows.

Bond investors suspect economies will still need massive amounts of central bank support long after they reopen and that is keeping yields low even as governments borrow much more.

Yields on U.S. 10-year notes were trading at 0.67% having recovered from a blip up to 0.68% last week when the market absorbed a tidal wave of new issuance.

The decline in U.S. yields might have been a burden for the dollar but with rates everywhere near or less than zero, major currencies have been holding to tight ranges.

The dollar was a fraction firmer on the yen on Monday at 107.83 JPY= but well within the 105.97 to 108.08 band that has lasted since the start of May.

The euro was a shade firmer at $1.0916 EUR=, having spent the month so far wandering between $1.0765 and $1.1017.

Against a basket of currencies the dollar was 0.2% lower at 99.620 =USD, but still sandwiched between support at 99.001 and resistance around 100.560.

Analysts at CBA felt the dollar could break higher should China-U.S. tensions actually threaten their trade deal.

“Although not our central scenario, if the U.S. or China were to withdraw from the Phase One deal, USD would sharply appreciate while CNH, AUD and NZD would decline,” they wrote in a note to clients.

In commodity markets, gold edged up 0.2% to $1,733 an ounce.

Oil prices were supported by falling supplies as OPEC cut production and the number of U.S. and Canadian rigs dropped to record lows for the third week running.

Brent crude futures rose 71 cents to $36.24 a barrel, while U.S. crude gained $1.14 to $34.39.

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'This could be the one that gets me,' says oilfield service veteran

(Reuters) – Tim Harris was preparing to relocate for an assignment with energy services firm Halliburton Co (HAL.N) for the fifth time in 15 years when his career came to a halt.

A third-generation employee, Harris rose through the ranks at the top shale-oil services provider to oversee oilfield crews. He sailed through several busts, with the exception of a 9-month break in 2016.

But April’s historic price crash, which has left U.S. crude prices down 50% since January, put him and tens of thousands of oil service veterans out of work. The cuts have gone deep into the ranks of managers, taking seniority and skills gained through past downturns.

Such cuts, which are expected to accelerate this year, spell trouble for firms when it comes to restaffing and tapping know-how from prior busts, said some industry executives interviewed by Reuters.

Halliburton this month cut 22% of its headquarters staff while Schlumberger recently reshuffled its executive team and warned of “significant” expenses for job cuts this quarter. Oil major BP plans to cut half its senior managers in coming months.

Since March, some 66,300 oilfield jobs, or 8.5% of the sector’s workforce disappeared, according to an analysis by trade group Petroleum Equipment and Services Association. For all of 2016, when crude oil prices slumped amid a supply glut, employment in the sector fell 17.4%.

“Losing talented people is a concern,” said Kevin Broom, a PESA director who did the analysis. “We’re going to need that knowledge and expertise when demand returns.”

Harris has cut his oil ties, moving to Amazon.com, where he accepted an entry-level manager’s job in light of the 14.7% April U.S. unemployment rate.

The oil industry could struggle to re-hire experienced managers if other sectors rebound first, said Ron Ness, president of the North Dakota Petroleum Council.

Career website LinkedIn.com has dozens of goodbye posts from workers with 15- to 30-year careers in the oilfield, many with top firms Schlumberger, Halliburton and Baker Hughes Inc. More than two dozen tributes appeared recently from mid- to senior-level Schlumberger executives.

“I’m joining the crowd posting my departure via retirement from Schlumberger after 34-years,” Jatinder Kalra, a team leader, wrote in a heartfelt post.

“It’s Armageddon for oilfield service companies,” said Andrew Graham, a 20-year Schlumberger veteran cut in April. He was the only member of his sales team in the last bust to keep his job. This time, “There’s no work,” he said.

Graham was attending a family celebration when his mobile phone buzzed with news that top producers Russia and Saudi Arabia ended a pact that limited their oil production.

“I told my wife, ‘This could be the one that gets me,’” Graham recalled in an interview with Reuters.

In some ways, the scale of the latest job reductions is unprecedented. Fracking services provider ProPetro Holding Corp (PUMP.N) cut 89% of its workforce, according to state workforce filings.

Halliburton, which cut over 8% of its North American staff last year and furloughed 3,500 employees in March, since has cut another 2,000 jobs in Texas alone.

“This is truly a tragedy for many of these mid-level to senior executives,” said Ed Hirs, an energy researcher at the University of Houston.

Primoris Services Corp (PRIM.O) operations manager Ray Scriven was cut in late March via a Zoom call. Despite losing his job, he said he could understand why highly skilled workers were let go.

“I know they’re faced with decisions they’ve never had to make before,” Scriven said.

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Toyota prepping for gradual re-start in Mexico: spokesman

MEXICO CITY (Reuters) – Toyota Motor Corp’s Mexico unit is in a preparation phase for the gradual re-start of its operations in the states of Baja California and Guanajuato, a spokesman told Reuters on Monday.

“This stage includes the implementation of protocols and health security measures, as well as training activities and production tests that allow us to adapt to new standards,” the spokesman said.

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Wall Street mixed as China-U.S. tensions weigh

(Reuters) – Wall Street was mixed on Friday in a mostly tame finish to a week of strong gains, as investors gauged China-U.S. tensions and amid ongoing uncertainty about the pace of economic recovery from the coronavirus.

President Donald Trump’s warning on Thursday that the U.S. would react strongly to China’s plan for a national security law in Hong Kong has raised concerns over Washington and Beijing’s possibly reneging on their Phase 1 trade deal.

The rhetoric knocked Wall Street off multi-month highs, although the main indexes were still set to add over 2% for the week, fueled by optimism about an eventual coronavirus vaccine and the easing of virus-related curbs.

“The biggest thing out there today is the Hong Kong/China saber rattling,” said Eric Freedman, chief investment officer at U.S. Bank Wealth Management. “We still think COVID-19 concerns are in the driver’s seat, but we could see U.S.-China relations move back into the front seat.”

The Nasdaq index is down about 5% from its Feb. 19 record high, helped in recent weeks by gains in Microsoft , Amazon and other heavyweight companies seen coming out of the economic downturn stronger than their smaller rivals.

At 2:17 p.m. ET, the Dow Jones Industrial Average was down 0.11% at 24,446.31 points, while the S&P 500 gained 0.14% to 2,952.58. The Nasdaq Composite added 0.36% to 9,318.50.

Six of the 11 major S&P 500 sector indexes were lower, with energy dropping more than 1% as oil prices sank 5%. [O/R]

Mixed earnings from retailers Walmart Inc, Best Buy Co Inc and Home Depot Inc earlier this week showed online shopping gaining traction with the lockdown orders, a trend that could damage brick-and-mortar players already feeling pressure from internet rivals.

On Friday, Chinese e-commerce giant Alibaba Group reported better-than-expected quarterly profit, but its shares tumbled almost 6%. Smaller rival Pinduoduo Inc’s U.S.-listed shares surged 11% after the company posted upbeat results.

Nvidia rose 2.8% after forecasting strong quarterly revenue as demand surges for its data center chips.

KKR & Co rose 0.9% after India’s Reliance Industries said the private equity firm would buy a 2.3% stake in its digital unit for 113.67 billion rupees ($1.50 billion).

Data analytics software maker Splunk Inc jumped 12% after it said it expects more demand for its cloud services.

Declining issues outnumbered advancing ones on the NYSE by a 1.11-to-1 ratio; on Nasdaq, a 1.03-to-1 ratio favored decliners.

The S&P 500 posted five new 52-week highs and no new lows; the Nasdaq Composite recorded 52 new highs and eight new lows.

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