European stocks rise, diverging from U.S. tech fears

A worker assembles VW ID.3 electric cars at the Volkswagen factory on July 31, 2020 in Zwickau, Germany.

Jens Schlueter/Getty Images

European stocks advanced Monday, diverging from the U.S. after a rough week in markets.

Down 1.9% last week, the Stoxx Europe 600

rose 0.8%, with automakers including Renault

and Volkswagen


The German DAX
French CAC 40

and U.K. FTSE 100

also advanced.

U.S. stock futures, which will still trade despite U.S. markets being shut for the Labor Day holiday, were lower, particularly for the tech-oriented Nasdaq 100

Last week the tech-dominated Nasdaq Composite

lost 3.2%, its worst decline since the period ending March 20, and first drop after five consecutive gains.

SoftBank Group

shares dropped over 7% in Tokyo on Monday after The Wall Street Journal reported the Japanese investment group bought $4 billion worth of options tied to around $50 billion worth of individual tech stocks.

“There was no specific trigger to the selloff but after extreme bullishness driven by monetary and fiscal policies, stock prices reached levels that could no longer be justified by fundamentals,” said Hussein Sayed, chief market strategist at FXTM. “Liquidity and low interest rates alone cannot be the solution to everything, so it’s essential to see continued improvement in economic data and an end to the pandemic for sustainable upside in risk assets. ”

Germany reported a 1.2% rise in industrial production for July, which was a slower than forecast rise.

The British pound

weakened after the Financial Times reported the U.K. was working on legislation to override parts of the Brexit withdrawal agreement. The Sunday Express separately reported a dossier is being considered by Downing Street that would seek to limit access for European Union companies seeking to raise money in London. Talks on a post-Brexit U.K.-European Union trade deal are due to re-start Tuesday.

Associated British Foods

rose 4% after saying trading in the fourth quarter ending Sept. 12 in both its food businesses and Primark exceeded expectations.

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REITs Unfazed By Tech Wreck

Real Estate Weekly Outlook

The “unofficial end” of summer came with one final “splash” in its final days as volatility returned to U.S. equity markets following several months of relative tranquility. This week’s sell-off had a different and perhaps “healthy” feel to it compared to the sharp declines seen in March and April as the losses came despite an encouraging slate of employment data that showed a continued rebound in labor markets. In what we described as a “Robinhood shakeout,” the highest-flying technology names were among the hardest-hit this week while the “shutdown sensitive” sectors were generally among the leaders.

(Hoya Capital Real Estate, Co-Produced with Brad Thomas)

Snapping a six-week winning streak and retreating from its mid-week record highs, the S&P 500 ETF (SPY) dipped 2.3% on the week. All eyes were on the high-flying technology stocks – the primary source of the volatility seen this week – as the Nasdaq 100 ETF (QQQ) dipped nearly 7% over the last final trading days, ostensibly the first real “challenge” to its relentless rally over the last four months. Real estate equities – particularly in the “shutdown-sensitive sectors” were curiously among the safe-havens this week amid the sell-off. The Equity REIT ETF (VNQ) finished lower by 0.7% this week with 10 of the 18 property sectors finishing in positive territory. The Mortgage REIT ETF (REM), however, finished lower by 2.6% this week after last week’s 2.9% gain.

real estate investing

Unlike the volatility seen during the peak of the pandemic in March and April, the choppiness seen this week was purely an equity market phenomenon. The 10-Year Treasury Yield (IEF) was essentially unchanged on the week, as were valuations of Investment Grade (LQD) and High-Yield (HYG) corporate bonds. Even so, 9 of the 11 GICS equity sectors were lower on the week, dragged down by the Energy (XLE), Technology (XLK), and Communications (XLK) sectors. The tech-related weakness seemed to extend into a broader “reverse momentum” theme as even the high-flying homebuilders and broader Hoya Capital Housing Index pulled back this week despite another strong slate of housing market and employment data.

homebuilding ETF

Real Estate Economic Data

Below, we analyze the most important macroeconomic data points over the last week affecting the residential and commercial real estate marketplace.

real estate data

This week’s declines came despite an encouraging slate of employment data. The Bureau of Labor Statistics reported that the U.S. economy added 1.37 million jobs in August – slightly better than economists’ estimates for gains of 1.35 million. Most notably, however, the “headline” unemployment rate ticked down to 8.4% from 10.2% in the prior month as the separate BLS Household Survey – on which the unemployment rate is derived from – showed employment gains of 3.76 million jobs in August – the second largest month of job growth in the survey’s history. Even with the rebound of 10.6 million jobs over the last four months, however, total nonfarm payrolls are still roughly 11.5 million below pre-pandemic levels. This follows ADP data earlier in the week which showed that 428k jobs were added in August – below expectations of 950k – but prior months were again revised higher.

employment data

We’ve remained quite a bit more optimistic than consensus on the employment and economic outlook since early May as the devastating economic lockdowns began to be lifted. We’ve discussed that investors not to underestimate the “unstoppable force” of WWII-levels of fiscal stimulus and the unprecedented levels of monetary support, and better-than-expected data has been common theme over the last several months as the Citi Economic Surprise Index has remained at or near record-high levels. There may still be more “low-hanging-fruit” left in the rebound as roughly 65% of recent job losers continue to classify themselves as on “temporary layoff” totaling over 6 million, which is down from a peak of 18 million back in April.

temporary job losses

In fact, we’ve “only” seen an additional 2.1 million Americans report to be “permanent” job losers above the “normal” pre-pandemic levels in February, but we did see 534k Americans become “permanently employed” last month after July saw a modest decline. Jobless claims data this week was also better than expected as Initial Claims declined to 0.89 million in this week’s DOL report, retreating from 1.01 million last week. Perhaps more encouragingly, Continuing Claims dipped by another 1.24 million last week to 13.25 million. Since the peak in early May at around 25 million, Continuing Claims have retreated by 11.6 million – roughly consistent with the 10.6 million jobs recovered from the aforementioned BLS nonfarm report.

jobless claims

In addition to employment data, we also saw a slate of solid PMI data throughout the week, and a mixed report on construction spending. Residential spending has bounced back over the last three months, consistent with data showing clear signs of a V-shaped recovery in the U.S. homebuilding sector. Perhaps some good news for commercial real estate landlords: nonresidential construction spending has pulled back sharply in 2020 since the start of the pandemic as developers take a “wait-and-see” approach to new projects amid immense uncertainty over future demand for office, retail, and lodging space. The Commerce Department said on Tuesday that total construction spending decreased 0.1% from last July, pressured by a 4.3% annualized year-over-year decline in private nonresidential spending.

The U.S. housing market isn’t showing any signs of cooling as the industry continues to lead the early stages of the post-pandemic economic recovery. The Mortgage Bankers Association reported this week that mortgage applications to purchase a single-family home are now higher by 28% from last year. Helping to power this rebound has robust demographic-driven demand and a decline in the 30-Year Fixed Mortgage Rate, which now stands at 3.08%, barely above record-low levels. Despite historically low housing inventory, millennial purchase activity continued to rise in July, according to the latest Ellie Mae Millennial Tracker. The share of all purchase loans closed to millennials reached 61% for the month, up five percentage points from June.

housing recovery

Commercial Equity REITs

It was a slow week of newsflow in the commercial real estate sector, but we did hear several business updates that showed continued sequential improvement in rent collection rates since April. Net lease REIT Realty Income (O) announced it collected 93% of August rents, up from 88% in Q2. Fellow net lease REIT Agree Realty (ADC) announced that it collected 96% of August rent payments. Apartment REIT Independence Realty (IRT) announced that it collected 98% of July and August rents, ahead of Q2 rates. Industrial REIT First Industrial (FR) announced that it has now collected 99% of August rents after collecting 99% of Q2 rents. Finally, fellow industrial REIT EastGroup Properties (EGP) announced it collected 98% of August rents, roughly in line with Q2 collection rates.

As discussed last week REITs: This Time Was Different where we discussed some of the fundamental factors that resulted in the “lost decade” for REITs. While the coronavirus crisis isn’t yet over, the REIT sector appears likely to avoid the type of long-term, lingering pain that was felt by the sector during the Financial Crisis. Some aspects of this crisis were more acute than the Financial Crisis – including the wave of dividend cuts – but strong balance sheets and access to capital prevented the type of shareholder dilution that resulted in a “lost decade” for much of the REIT sector from 2005 to 2015.


Interestingly, the REIT sector actually finished in slightly positive territory this week if one were to use an equal-weight index across all 170 REITs in our coverage universe. Underscoring the quirkiness of this week’s price action, small-cap retail and hotel REITs were among the strongest performers with Seritage Growth (SRG), Kite Realty (KRG), and SITE Centers (NYSE:SITC) all higher by at least 6% while student housing REIT American Campus (ACC) also delivered a strong week. The recently-high-flying data center and timber REIT sectors were among the laggards this week as Weyerhaeuser (WY), Digital Realty (DLR.PK), and CyrusOne (CONE) all dipped more than 5%.

top REITS 2020

This week, we published Single Family Rentals: The Burbs Are Back. Amid the coronavirus pandemic, residential REITs – particularly the traditionally countercyclical single-family rentals – have proven to be a source of relative shelter for investors as single-family rental REITs are one of five real estate property sectors in positive territory in 2020. Despite the pandemic-related headwinds, SFR REITs reported near-perfect rent collection and strong rental growth. Fueled by the maturing millennial generation, the 2020s were already poised to be a decade of “suburban revival,” and behavioral changes in the post-coronavirus world have provided an added spark.demographics housing

We also published Office REITs: Work-From-Home Reckoning. Despite reporting near-perfect rent collection throughout the pandemic, office REITs continue to be under pressure as the “Work From Home” paradigm threatens the long-term outlook. Survey data and commentary from corporations indicate that the WFH paradigm is here to stay long after the pandemic subsides. Technology has accelerated the pre-existing trends of increased workplace efficiency. As “WFH” days become the industry standard, the office sector’s loss is the housing market’s gain. Nuance is required, however, as suburban and Sunbelt office assets are likely to see robust demand over the next decade, mimicking similar trends as those seen after the 9/11 terrorist attacks amid a broader “suburban revival”.

office REIT sector

Mortgage REITs

Mortgage REITs finished lower this week as residential mREITs dipped 3.3% while commercial mREITs finished lower by 2.5%. Amid another quiet week of mREIT-related newsflow, the sector was pressured by uncertainty over the impact of a newly-announced CDC regulation to pause evictions, a patchwork relief measure after stimulus talks broke down last month which were expected to extend a federal moratorium on evictions from properties with federally backed mortgages. While regulatory relief measures have generally provided support for the mortgage markets over the last several months, the rather unprecedented White House order through the CDC comes after a series of surprising measures by the FHFA and does raise some eyebrows and set a regulatory precedent that appeared to spook some investors.

mREITs 2020

Residential mortgage REITs did rebound late in the week, however, after data from Black Knight (BKI) showed a continued improvement in the health of the mortgage market. The number of mortgages in active forbearance continued to decline throughout August and are now down about 1 million since the peak in May, a decline of more than 20%. Through the first four weeks of August, forbearance starts were down 13% month over month from the comparable four-week period in July, a pleasant surprise considering that many analysts had expected a reacceleration in forbearance starts after lawmakers were unable to extend several key stimulus measures.

black knight 9.4.2020We recently published our Mortgage REIT Earnings Recap. After 31 of 42 mREITs cut or suspended dividends from March through June, we haven’t seen any additional cuts since the start of July. However, only one mREIT, Arbor Realty (ABR), has raised distributions to rates above last year’s levels. Several residential mREITs have resumed or raised dividends after initially cutting including MFA Financial (MFA), Ellington Financial (EFC), Great Ajax (AJX), ARMOUR Residential (ARR), New Residential (NRZ), PennyMac Mortgage (PMT), and Two Harbors (TWO), but none of these distributions are back above pre-pandemic levels. We see the current distributions rates as relatively attractive with an average dividend yield of 8.0% for residential mREITs and 7.6% for commercial mREITs.

mortgage REIT dividend increases

REIT Preferreds

Last quarter, we published REIT Preferreds: Higher-Yield Without Excess Risk. The REIT Preferred ETF (PFFR) ended the week higher by 0.2%. The preferred issues from embattled mall REITs – CBL & Associates (CBL) and Pennsylvania REIT (PEI) were among the laggards this week as these REITs continue to teeter on the edge of bankruptcy. Among REITs that offer preferred shares, the performance of these securities has been an average of 18.9% higher in 2020 than their common shares. Preferred stocks generally offer more downside protection, but in exchange, these securities offer relatively limited upside potential outside of the limited number of “participating” preferred offerings that can be converted into common shares.

rEIT preferreds

2020 Performance Check-Up

For the year, Equity REITs are now lower by roughly 15.9% and Mortgage REITs are off by 40.7% compared with the 6.4% gain on the S&P 500 and the 1.2% decline on the Dow Jones Industrial Average (DIA). Five of the eighteen REIT sectors are now in positive territory for the year while on the residential side, five of the eight U.S. housing industry sectors in the Hoya Capital Housing Index are in positive territory for the year. The gap between the best-performing REIT sector – data centers – and worst-performing REIT sector – malls – has closed over the last several weeks, but remains a whopping 71% in 2020. At 0.72%, the 10-year Treasury Yield has retreated by 120 basis points since the start of the year and is roughly 250 basis points below recent peak levels of 3.25% in late 2018.

real estate performance

Next Week’s Economic Calendar

The economic calendar slows down in the holiday-shortened week ahead after a frenetic slate of employment and housing data over the last two weeks. Inflation data highlights the slate of data with Producer Price Index data on Thursday and Consumer Price Index data on Friday. Inflation metrics showed signs of life in the prior month after most inflation metrics hit multi-decade lows in May and June. As usual, we’ll be watching the weekly Mortgage data on Wednesday and Jobless Claims data on Thursday for signs that the housing and employment recovery can continue into early autumn.

real estate economic data

If you enjoyed this report, be sure to “Follow” our page to stay up to date on the latest developments in the housing and commercial real estate sectors. For an in-depth analysis of all real estate sectors, be sure to check out all of our quarterly reports: Apartments, Homebuilders, Manufactured Housing, Student Housing, Single-Family Rentals, Cell Towers, Casinos, Industrial, Data Center, Malls, Healthcare, Net Lease, Shopping Centers, Hotels, Billboards, Office, Storage, Timber, Prisons, Real Estate Crowdfunding, and REIT Preferreds.

Disclosure: Hoya Capital Real Estate advises an Exchange-Traded Fund listed on the NYSE. In addition to any long positions listed below, Hoya Capital is long all components in the Hoya Capital Housing 100 Index. Index definitions and a complete list of holdings are available on our website.

housing 100 index

Hoya Capital Teams Up With iREIT

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Disclosure: I am/we are long HOMZ, AMT, ARE, AVB, BXMT, DRE, DLR, EFG, EQIX, FB, FR, MAR, MGP, NLY, NHI, NNN, PLD, REG, ROIC, SBRA, SPG, SRC, STOR, STWD, PSA, EXR, AMH, CUBE, ELS, MAA, UDR, SUI, CPT, NVR, EQR, INVH, ESS, PEAK, LEN, DHI, HST, AIV, MDC, ACC, PHM, TPH, MTH, WELL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Hoya Capital Real Estate (“Hoya Capital”) is an SEC-registered investment advisory firm that provides investment management services to ETFs, individuals, and institutions, focusing on portfolio and index management of publicly traded securities in the residential and commercial real estate industries. A complete discussion of important disclosures is available on our website ( and on Hoya Capital’s Seeking Alpha Profile Page.

It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate. Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings is available and updated at

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S&P 500 set to open higher as falling jobless rate offsets tech slide By Reuters

© Reuters. The front facade of the of the NYSE is seen in New York

By Medha Singh and Devik Jain

(Reuters) – The S&P 500 was set for a higher open on Friday following a brutal selloff in the previous session as a drop in the unemployment rate offset a slide in technology stocks, while investors remained cautious about a patchy economic recovery.

Nonfarm payrolls increased by 1.37 million jobs last month after advancing 1.73 million in July, the Labor Department’s closely watched employment report showed. The unemployment rate fell to 8.4% from 10.2% in July, steeper than the 9.8% fall that economists polled by Reuters forecast.

Still, the data adds pressure on the White House and Congress to restart stalled negotiations over the next coronavirus relief package to lift the economy out of the worst recession since the Great Depression.

“The data is consistent with an improving labor market that is helping to support consumption, but remains a long ways away from pre-COVID-19 levels,” said Sameer Samana, senior global market strategist at Wells Fargo (NYSE:) Investment Institute.

After climbing to record highs on the back of historic stimulus and a narrow rally in heavyweight technology stocks, the S&P 500 and Nasdaq suffered their worst day in nearly three months on Thursday as investors booked gains.

Apple Inc (O:), Microsoft Inc (O:), Inc (O:), Tesla Inc (O:) and Nvidia Inc (O:), which bore the brunt of Thursday’s losses, extended declines to between 1% and 4% in premarket trading.

“Today you’re seeing participants trying to test whether yesterday’s sell-off is going to turn out to be something that has more to it or it was just a one-day selling pressure,” said Robert Pavlik, chief investment strategist at SlateStone Wealth LLC in New York.

Fund managers have warned Thursday’s declines may be a preview of a rocky two months ahead as institutional investors return from summer vacations and refocus on the potential economic pitfalls.

The run up to the Nov. 3 presidential election is also expected to add to volatility.

At 8:53 a.m. ET, were up 176 points, or 0.62%. S&P 500 e-minis were up 8.5 points, or 0.25% and were down 76 points, or 0.64%.

Wall Street’s fear gauge () eased from a 10-week high.

Shares of rate-sensitive bank stocks including Bank of America Corp (N:), Citigroup Inc (N:), JPMorgan Chase & Co (N:) rose between 1.7% and 2% as the benchmark 10-year () yield bounced off of a near four-week low. [US/]

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Stock-market rout: Why it’s too early to call tech plunge the start of a correction

Big rallies often come to an ugly end — and that was certainly the case Thursday for tech stocks and other high-flying sectors that have benefited from momentum-driven waves of buying. But that doesn’t mean a full-fledged correction for the most popular stocks — or the broader market — is under way.

“It’s very difficult to say definitively that something that is up 28% on the year and up [more than 70%] from the bottom going down 4% is a sustainable correction,” said David Bahnsen, chief investment officer at Newport Beach, Calif.-based The Bahnsen Group, referring to the tech-heavy Nasdaq Composite Index

While a potentially brutal Nasdaq correction is likely inevitable, there’s no “formulaic” way to tell when one has started, he said in an interview.

Key Words: Is this ‘the beginning of the end?’ Billionaire Bill Ackman shares his thoughts on the big market retreat

By the close, the Nasdaq was down 5%. The S&P 500

fell 3.5% and the Dow Jones Industrial Average

ended the day down more than 800 points, or 2.8%, after falling more than 1,000 points at its session low. The drop marked the biggest one-day percentage declines for all three benchmarks since June, and ended a four-day winning streak for the Nasdaq and a 10-day string of gains for the S&P 500 tech sector.

See:These were the biggest stock-market losers on Thursday as tech shares tanked

Warning signs abounded as technology shares kept pushing higher, market watchers said. Options volatility remained stubbornly high even as stocks continued to rally — a sign of nervousness — and tech valuations, while a poor guide to market timing, became increasingly stretched, said Fawad Razaqzada, analyst with ThinkMarkets, in a note.

Related:Tech stocks and the rest of the market are both very expensive — for 2 ‘completely different reasons’

Also, momentum indicators, such as the relative strength index, were at levels perceived as extremely overbought on major indexes, which meant that “even the most bullish speculators chasing momentum would have found it difficult to justify buying at such extreme levels,” he said.

The selloff could be an indication of things to come, “where fundamentals play a larger part in valuations, as opposed to the irrational exuberance that has persisted in recent months within tech,” said Peter Essele, head of portfolio management for Commonwealth Financial Network.

Essele said the lack of a broad selloff across all sectors showed that “hot money” had been chasing large tech names.

Indeed, the lack of heavier selling outside the most high-flying sectors pointed to signs of rotation, a positive sign for the overall market, Bahnsen said.

While the Dow fell more than 800 points, shares of JPMorgan Chase & Co.
the world’s largest bank, declined only 0.3% and shares of Exxon Mobil Corp.
the world’s largest oil company, lost only 0.2% after spending much of the day in the green. All 11 S&P 500 sectors fell, but energy shares lost only 0.6% and financials declined 1.6% — both are among the most out of favor in 2020, down nearly 43% and 19% year to date, respectively.

Down days where you see energy and financials holding up despite steep losses elsewhere indicates rotation, not capitulation, a bullish sign overall, Bahnsen said.

Also, in the era of heavy ETF ownership, when a fund needs to sell off Apple shares, shares of companies that don’t have organic selling pressure get pulled down with them, he said.

So now what? Friday’s session already carried the potential for volatility, coming ahead of a three-day holiday weekend and after investors get a look at the July jobs report.

Economic Preview: U.S. likely added 1.2 million jobs in August, economists say, but hiring has slowed

Investors might have second thoughts about technology shares at still-elevated levels, Razaqzada said, which could make for either increased rotation into lagging sectors, pushing tech stocks into a period of consolidation or beginning a proper correction.

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Wall Street sinks on tech selloff, recovery worries By Reuters

© Reuters. The front facade of the of the NYSE is seen in New York

By Medha Singh and Devik Jain

(Reuters) – Wall Street’s main indexes tumbled on Thursday, heading for their worst day since June as investors dumped high-flying technology-focused stocks, while economic data highlighted concerns about a long and difficult recovery.

Shares of Facebook (O:), Apple (O:), (O:), Netflix (O:) and Alphabet (O:) sank between 4.6% and 6.2%. The NYSE FANG+TM Index (), which includes the five core FAANG stocks, shed 6.2%, putting it on track for its biggest one-day decline since March 16.

Unprecedented fiscal and monetary support as well as increasing bets on stay-at-home tech stocks have powered a rally in U.S. stocks in recent weeks, sending the S&P 500 and Nasdaq to record closing highs on Wednesday.

“Some of the stocks have gotten a little pricey, and what the actual cause is to spark this selloff is difficult to say,” said Randy Frederick, vice-president of trading and derivatives for Charles Schwab (NYSE:) in Austin.

“The leading sector for quite a long time has been the Nasdaq, which is very heavily weighted in technology stocks so people just saw this as an opportunity to take the profits off the table.”

Earlier in the day, data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, but remained extraordinarily high. The government’s closely watched monthly payrolls report is set for Friday.

“We’re going to struggle to put people back to work, it’s going to be another three to four years and then we have to sustain it,” said Greg Hahn, chief investment officer at Winthrop Capital Management in Indiana.

Separately, a survey showed U.S. services industry growth slowed in August, likely as the boost from the reopening of businesses and fiscal stimulus faded.

Wall Street’s fear gauge () crossed its 200-day moving average, to hit its highest level in seven weeks.

The technology sector () declined 5%, while communication services () and consumer discretionary () lost more than 3% each. At 11:34 a.m. ET, the Dow Jones Industrial Average () was down 633.96 points, or 2.18%, at 28,466.54, the S&P 500 () was down 105.09 points, or 2.93%, at 3,475.75. The Nasdaq Composite () was down 530.39 points, or 4.40%, at 11,526.06.

Tesla Inc (O:) tumbled 7.4%, falling for the third straight session.

PVH Corp (N:) rose 3.6% after the Calvin Klein owner posted a surprise quarterly profit, boosted by strong online demand for comfortable and casual clothing during the coronavirus-led shift to work from home.

Declining issues outnumbered advancers for a 3.87-to-1 ratio on the NYSE and for a 4.12-to-1 ratio on the Nasdaq.

The S&P index recorded 18 new 52-week highs and no new low, while the Nasdaq recorded 23 new highs and 38 new lows.

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