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Stocks - Wall Street Pares Losses as Citi Raises S&P Target

By Geoffrey Smith 

Investing.com -- U.S. stock markets pared early losses to be mixed after early trading on Tuesday, giving up some of the sharp gains posted on Monday but still holding up despite concern about the risk to the economy from a second wave of the Covid-19 virus.

By 14:15 AM ET (1015 GMT), the Dow Jones Industrial Average was down 150 points or 0.6%, while the S&P 500 was down 0.1% and the Nasdaq Composite was building on Monday’s record-high close, rising 0.4%.

The S&P has been on a five-day winning streak, while the Nasdaq’s new record, fueled by outlandish gains in stocks such as Tesla (NASDAQ:TSLA), has prompted fears that the market has run too far ahead of economic reality. 

Atlanta Federal Reserve President Raphael Bostic warned in an interview with the Financial Times on Tuesday that the recovery was in danger of stalling because of the surge in new infections across the south and west. Bostic, whose district includes Florida, said there were "troubling" signs from high-frequency data that "might suggest that the trajectory of this recovery is going to be a bit bumpier than it might otherwise (be)." His comments chimed with others from Jefferies (NYSE:JEF) investment bank, whose analysts had also pointed to a levelling-off of high-frequency data such as mobility app readings.

Early jitters were eased somewhat by reports that Citigroup (NYSE:C) had raised its year-end target for the S&P 500, citing "incessant" support from the Federal Reserve. Beyond the headlines, some may have missed that the new target of 2,900 is more than 10% below the index's current level. 

"With a central bank ready to comment or act on any pullback, the plausibility of retesting the March lows seems slim," Citi's analysts said.

Among individual stocks, Tesla rose another 0.8% for a gain of 28% over the last week that owed much to delivery figures for the second quarter that were some 25% above expectations. The group's financial results are due in two weeks' time. Internal memos that have leaked in the last couple of weeks suggest that the company was still struggling to break even. Tesla's market value is now over $254 billion. Even on the assumption of JMP Securities that Tesla is on track to have annual revenue of $100 billion by 2025 - that is, four times 2019's revenue - that still prices the company at 2.5 times its expected 2025 sales. 

Elsewhere Tuesday. Novavax (NASDAQ:NVAX) stock rose by nearly one-third after the government awarded it  $1.6 billion to help its efforts to find a vaccine for the Covid-19 virus, while Regeneron (NASDAQ:REGN) stock rose 3.4% to a new record high after winning a $450 million contract from the same government program. 

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