Wall Street drifts as stock rally takes a pause; yields drop

NEW YORK (AP) — U.S. stocks are drifting between small gains and losses Tuesday as Wall Street's big rally lets off the accelerator.

The S&P 500 was down 0.1% in afternoon trading after falling back from an earlier 0.3% gain. The Dow Jones Industrial Average was up 40 points, or 0.2%, at 26,705, as of 2:45 p.m. Eastern time, and the Nasdaq composite was edging lower from its record, down 0.2%.

Stock indexes are hanging close to their records after clawing back most or all of their sell-off from earlier in the year, with the S&P 500 within 3% of its all-time high. But caution is still very prevalent across other markets: Treasury yields were falling, while gold was rising as investors sought safety.

Within the stock market, energy companies were making some of the largest gains. But nearly half the stocks in the S&P 500 were lower following a mixed set of earnings reports.

On the winning end was Take-Two Interactive Software, which rose 4.7%. The video-game maker reported a profit for the spring that was almost double year-ago levels as customers stuck at home played Grand Theft Auto and other games instead of going outside.

It also raised its sales forecast for its fiscal year, a notable move when many companies have been shy to give any kind of predictions given all the uncertainty created by the coronavirus pandemic.

On the opposite end was insurer American International Group. AIG fell 7.5% for one of the larger losses in the S&P 500 even though it reported stronger results for the latest quarter than Wall Street expected. Some analysts cited several unusual items that clouded its report, such as COVID-related losses, which makes it difficult to extrapolate how AIG’s profits will run from here.

In Washington, meanwhile, negotiators on a big economic relief package reported some progress as their talks resumed in the Capitol. But multiple obstacles remain before a deal can be struck, one that investors say is crucial for propping up the economy in its weakened state.

A weekly $600 in federal unemployment benefits has expired, threatening to crunch the finances of millions of out-of-work Americans. Recent data reports have shown an uptick in the number of workers filing for unemployment benefits after a resurgence of coronavirus counts pushed some states to reimpose restrictions on businesses. Economists expect a report on Friday to show that U.S. employers added 1.8 million jobs last month, which would be welcome growth but also a slowdown from June.

The Federal Reserve last week said that it will keep interest rates at their record low levels, as it continues to pump massive amounts of aid into the economy. Now, investors are waiting for Congress to do the same.

The yield on the 10-year Treasury note fell to 0.50% from 0.56% late Monday. It tends to move with investors' expectations for the economy and inflation.

The bond market was much earlier than the stock market to signal the coming economic disaster from the coronavirus pandemic. It has also remained much more cautious through the pandemic than the stock market has, in large part due to the Federal Reserve holding short-term interest rates at record lows.

Gold has been another investment that has moved strongly recently because of low interest rates and worries about the global economy. Gold for delivery in December rose $34.70 to settle at $2,021.00 per ounce.

In Europe, Germany’s DAX slipped 0.4% to give back some of its big gain from a day earlier, when reports showed that manufacturing recovered across much of the continent last month. France’s CAC 40 added 0.3%, and the FTSE 100 in London was up 0.1%.

In Asia, markets were more buoyant. Tokyo’s Nikkei 225 gained 1.7%, the Hang Seng in Hong Kong added 2% and the Kospi in Seoul picked up 1.3%. Stocks in Shanghai edged 0.1% higher.

Benchmark U.S. crude oil rose 69 cents to settle at $41.70 per barrel. Brent crude, the international standard, added 28 cents to $44.43 a barrel.

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AP Business Writer Elaine Kurtenbach contributed.