U.S. stock indexes inched further into record territory Wednesday, with a climb for the Dow Jones Industrial Average also gaining some momentum.
The move higher comes as strong second-quarter corporate earnings offset doubts about the pace of economic recovery, even with the coronavirus delta variant limiting consumer and business activity in some countries.
What are major stock indexes doing?
- The Dow Jones Industrial Average DJIA, +0.20% rose 87 points, or 0.3%, at 35,453, supported by gains in financials Goldman Sachs Group Inc. GS, +1.52%, American Express Co. AXP, +3.04%, and JPMorgan Chase & Co JPM, +2.11%.
- The S&P 500 index SPX, +0.27% was trading 12 points, or 0.3%, higher at 4,499, establishing a fresh intraday record at 4,501.08 boosted by a 1.5% rise in financials SP500.40, +1.44%.
- The Nasdaq Composite Index COMP, +0.19% traded 22 points, or 0.2%, higher at 15,042, after establishing an intraday all-time high at 15,052.21. But the index was facing headwinds by perkier Treasury yields.
What’s driving markets?
Investors pushed equities higher Wednesday, a day after the S&P 500 index put in its 50th all-time high of 2021 and the Nasdaq Composite closed above a round-number milestone above 15,000 for the first time on Tuesday.
“There’s all kinds of cash all over the place, and people are looking for places to put cash to work,” said Mike Mullaney, director of global markets research at Boston Partners, in a phone interview.
Recently, there’s been renewed buying in shares of big U.S. technology giants, or “safety stocks” that helped propel equities higher after the spring 2020 restrictions took hold, he said.
Mullaney attributed the trend to the climb in COVID infections and hospitalizations due largely to the delta variant of the coronavirus, but also to “tapering potentially on the horizon,” as investors have grown a bit more defensive.
But for now, ample liquidity provided by the Federal Reserve and by lawmakers in Washington in the form of fiscal support remains in focus.
“For sure, the liquidity from Congress and the Federal Reserve has been unprecedented,” said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank. “But it’s done its job.”
Quinlan argues that the private sector remains ready to step forward and drive economic growth when the Fed decides to cut back its support, including by reducing its large-scale asset purchases. “There’s going to be handoff,” he told MarketWatch. “I’m not worried about tapering.”
Recent activity in Washington also points to future fiscal support. House Democrats approved a $3.5 trillion budget resolution late Tuesday and advanced the $1 trillion bipartisan infrastructure bill, which could be viewed as adding further support to the U.S. economy.
The fiscal influx would come as strong second-quarter results from American corporations have already helped to buoy stock-market optimism.
Of the S&P 500 index companies that have reported second-quarter results, through last Friday, nearly 90% of them delivered results above expectations, marking the highest such tally on record, dating back to 1994, according to data compiled by Refinitiv. Only about 10% have missed estimates. By comparison, on average, since 1994, 66% of companies beat estimates and 20% miss estimates.
“Let’s face it second-quarter earnings are on the books and they are spectacular,” Karyn Cavanaugh, chief investment officer at Carolinas Wealth Management, told MarketWatch in an interview. “I think the bias is to the upside and I think we are going to continue to grind higher,” the CIO said.
Record-setting trade for equities comes despite rising inflation from supply chain bottlenecks and spiking demand as the economy recovers. The Federal Reserve consistently has described rising prices as likely transitory.
Looking ahead, Fed Chairman Jerome Powell no longer is expected to explicitly declare plans for tapering its $120 billion a month in asset purchases on Friday at the annual Jackson Hole central bankers symposium, held online for the second year in a row.
“All eyes are on the Fed,” Quinlan said, adding that while Powell might hint on Friday about talk of tapering, that’s different than immediately tightening financial conditions. “There’s still a lot of liquidity looking for a place to go. And the first stop is U.S. equities.”
Carolinas Wealth Management’s Cavanaugh said tapering likely happens at some point, but that it shouldn’t necessarily squelch bullish momentum. “Tapering is a long way from rising interest rates,” she said, referring to fed funds rates that are at a range between 0% and 0.25%.
In COVID news, Johnson & Johnson JNJ, -0.72% shared interim clinical data that indicates Americans who have received its single dose COVID-19 vaccine should get a second dose. The company said that two studies examining people who had received its shot found that a second dose boosted antibody levels. The studies haven’t yet been published in a medical journal.
Which companies are in focus?
- Express Inc. EXPR shares slumped in Wednesday trading after the apparel retailer reported a surprise profit. Shares were down 8.4%.
- Dick’s Sporting Goods Inc. DKS shares soared more than 16% in Wednesday after the athletic retailer reported record second-quarter profit and sales.
- Shoe Carnival Inc. SCVL shares were off 5.8% in Wednesday trade after the retailer reported second-quarter earnings and sales that beat consensus and gave an upbeat outlook.
- Cassava Sciences Inc. SAVA responded Wednesday to allegations posted overnight regarding the “accuracy and integrity” of trial data for its treatment of Alzheimer’s disease, saying it believed the claims are “false and misleading.” Its stock was down more than 26%.
- ICON Technologies Inc., which uses jumbo-sized 3-D printers to build homes, said Wednesday it closed a $207 million series B round of investment led by Norwest Venture Partners, which is backed by Wells Fargo & Co. WFC.
- “Meme” stocks are back in the spotlight, with GameStop Corp. GME off 1.4% on Wednesday and AMC Entertainment Holdings AMC stock up 3.3%.
How other markets are faring
- The benchmark 10-year Treasury note TMUBMUSD10Y, 1.340% was trading at 1.34%, compared with 1.289% on Tuesday.
- In Asia, Tokyo’s Nikkei 225 NIK, -0.03% closed 0.03% lower, while the Hong Kong Hang Seng Index HSI, -0.13% declined 0.13% and the Shanghai Composite SHCOMP, +0.74% rose 0.74%
- In Europe, London’s FTSE 100 UKX, +0.34% closed 0.3% higher as the pan-European Stoxx 600 SXXP, +0.01% ended virtually unchanged, up 0.01%. France’s CAC 40 PX1, +0.18% finished 0.2% higher and Frankfurt’s DAX DAX, -0.28% slipped 0.3%
- Crude-oil prices were higher, with U.S. benchmark oil CL.1, +1.18%, West Texas Intermediate on the New York Mercantile Exchange, up 0.9% at $68.18 a barrel.
Jack Denton contributed reporting