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S&P 500, Dow drift higher as investors eye stimulus

Credit: REUTERS/BRENDAN MCDERMID

The S&P 500 and Dow crept higher on Tuesday as investors held out for more U.S. government stimulus, but strained Sino-U.S. relations over TikTok and disappointing quarterly earnings from Ralph Lauren and AIG curbed gains.

By Sagarika Jaisinghani and Medha Singh

Aug 4 (Reuters) - The S&P 500 and Dow crept higher on Tuesday as investors held out for more U.S. government stimulus, but strained Sino-U.S. relations over TikTok and disappointing quarterly earnings from Ralph Lauren and AIG curbed gains.

Ralph Lauren Corp RL.N slumped 6.5% to its lowest since mid-May after quarterly revenue plunged by nearly $1 billion due to coronavirus-led store closures and a slowdown in global demand for luxury goods.

American International Group Inc AIG.N also led the declines on the S&P 500 with a 8.2% drop as its quarterly adjusted profit slumped.

Reflecting the cautious mood, defensive stocks including real estate .SPLRCR, utilities .SPLRCU and consumer staples .SPLRCS led gains among the major S&P sectors. Energy .SPNY shone among the growth-linked cyclical sectors.

All eyes are now on a fifth major coronavirus-aid bill, with Senate Democratic Leader Chuck Schumer saying talks with the White House were moving in the "right direction".

"A good portion of the stimulus and any likely improvement in fundamentals has been priced in and we are seeing that in stretched valuations," said Talley Leger, senior investment strategist at Invesco in New York City.

"U.S. equities in general are one of the most overvalued markets in the developed world, centered on technology."

A stimulus-led rebound and a rally in tech-related stocks including Apple Inc AAPL.O, Netflix Inc NFLX.O and Amazon.com Inc AMZN.O has brought the S&P 500 to within 3% of its all-time high.

Meanwhile, with Microsoft Corp MSFT.O looking to buy short-video app TikTok's U.S. operations, Trump said on Monday the U.S. government should get a "substantial portion" of any deal price.

On Tuesday, state-backed newspaper China Daily said the country will not accept the "theft" of the technology company.

Microsoft's shares fell 2.1%.

At 12:38 p.m. ET, the Dow Jones Industrial Average .DJIwas up 99.11 points, or 0.37%, at 26,763.51, the S&P 500 .SPXwas up 3.41 points, or 0.10%, at 3,298.02. The Nasdaq Composite .IXICwas down 6.06 points, or 0.06%, at 10,896.74.

Evergy Inc EVRG.N slumped 11% after two sources said the board of the Midwest utility planed to remain independent as bids solicited from prospective merger partners did not offer sufficient value.

Take-Two Interactive Software Inc TTWO.O rose 4.9% as it raised its annual adjusted sales forecast on demand for its videogame franchises "Grand Theft Auto" and "NBA 2K".

Rival Activision Blizzard Inc ATVI.Ogained 1.4% ahead of its results due after the closing bell.

About 83% of the 352 companies in the S&P 500 that have reported quarterly results so far have beaten estimates for earnings, according to IBES Refinitiv data.

Walt Disney Co DIS.N, Fox Corp FOXA.O and Wynn Resorts Ltd WYNN.O are also expected to report quarterly results later in the day.

Advancing issues outnumbered decliners by a 1.61-to-1 ratio on the NYSE and by a 1.10-to-1 ratio on the Nasdaq.

The S&P index recorded 22 new 52-week highs and no new low, while the Nasdaq recorded 107 new highs and eight new lows.

(Reporting by Sagarika Jaisinghani and Medha Singh in Bengaluru; editing by Uttaresh.V)

((Sagarika.Jaisinghani@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 6182 2256;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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