U.S. stock indexes closed further in record territory Wednesday, with the Dow Jones Industrial Average extending its gains to a fourth straight day.
The move higher for equities 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.
- The Dow Jones Industrial Average rose 39.24 points, or 0.1%, to end at 35,405.50, supported by gains in financials Goldman Sachs Group Inc. American Express Co. and JPMorgan Chase & Co
- The S&P 500 index added 9.96 points, or 0.2%, finishing at a record 4,496.19, after establishing a fresh intraday record at 4,501.71 and boosted by a 1.2% rise in financials
- The Nasdaq Composite Index climbed 22.06 points, or 0.2%, closing at a record 15,041.86, after establishing an intraday all-time high at 15,059.43.
What drove markets?
Investors pushed equities higher Wednesday, with the S&P 500 index putting in its 51th all-time high of 2021 and the Nasdaq Composite booking its 30th record close of the year.
“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 popularity of tech stocks to the climb in COVID infections and hospitalizations due largely to the coronavirus delta variant, 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.”
The deluge of buybacks in the financial sector this year also suggests a feeling of resilience among top banking CEOs, with share repurchase volumes now overtaking the tech sector.
Recent activity in Washington also points to future fiscal support for the economy. House Democrats approved a $3.5 trillion budget resolution late Tuesday and advanced the $1 trillion bipartisan infrastructure bill.
The fiscal influx would come as strong second-quarter results from American corporations already have 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.
“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.
Looking ahead, Fed Chairman Jerome Powell may give some clues as the timing of any tapering of its bond 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.”
In COVID news, Johnson & Johnson released 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 were in focus?
- Nordstrom Inc. shares plunged 17.6% Wednesday after the department store reported quarterly sales that were down 6% from fiscal 2019.
- Shares of Western Digital Corp. rose 7.8% Wednesday after talks of a more than $20 billion merger deal with Japan’s Kioxia Holdings Corp were reported by the Wall Street Journal, citing people familiar with the matter.
- Deere &Co climbed 2.3% Wednesday after the agriculture equipment giant said it will increase its quarterly dividend payout to $1.05 a share, about an 17% increase.
- Express Inc. EXPR shares slumped 11.6% Wednesday trading after the apparel retailer reported a surprise profit.
- Dick’s Sporting Goods Inc. DKS shares soared 13.3% Wednesday after the athletic retailer reported record second-quarter profit and sales.
- Shoe Carnival Inc. SCVL shares fell 6.4% Wednesday 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 plunged 31.4%.
- 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 5.1% on Wednesday and AMC Entertainment Holdings AMC stock off 0.7%.
How did other markets fare?
- The benchmark 10-year Treasury note was at 1.342%, compared with 1.289% on Tuesday.
- In Asia, Tokyo’s Nikkei 225 closed 0.03% lower, while the Hong Kong Hang Seng Index declined 0.13% and the Shanghai Composite rose 0.74%
- In Europe, London’s FTSE 100 closed 0.3% higher as the pan-European Stoxx 600 ended virtually unchanged, up 0.01%. France’s CAC 40 finished 0.2% higher and Frankfurt’s DAX slipped 0.3%
- Crude-oil prices ended higher, with U.S. benchmark oil West Texas Intermediate on the New York Mercantile Exchange up 1.2% to settle at $68.36 a barrel.
- Gold futures settled lower Wednesday, with December gold down 1% to settle at $1,791 an ounce after ending above the $1,800 mark Tuesday.
Jack Denton contributed reporting