S&P 500, Dow scale all-time highs as economy picks up pace

People walk near the New York Stock Exchange (NYSE) at Wall Street on July 15, 2021 in New York City. — AFP pic
People walk near the New York Stock Exchange (NYSE) at Wall Street on July 15, 2021 in New York City. — AFP pic

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JULY 29 — The S&P 500 and the Dow indexes scaled record highs today as a slate of strong corporate earnings reports and data showing a pickup in US economic growth reinforced optimism around a steady post-pandemic recovery.

Ford Motor Co jumped 5.9 per cent to hit a more than three-week high as it lifted its profit forecast for the year.

Industrials Boeing Co and Caterpillar Inc, and banks including JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc gained between 0.4 per cent and 1 per cent, a day after the Federal Reserve said it was not yet time to start withdrawing its massive pandemic-era monetary stimulus.

The central bank’s comments also assuaged fears that a rise in cases of the Delta variant would hurt a solid US economic rebound. Data on Thursday showed gross domestic product increased at a 6.5 per cent annualized rate in the second quarter, while jobless claims fell to 400,000 for the week ended July 24.

“What really stands out (in the GDP data) is consumption; it really means that consumers are carrying the economy,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Trading on Wall Street in the past few months has also been dictated by rising inflation, and fears that higher prices would not be as transient as expected have recently knocked the benchmark S&P 500 off record highs.

Investors are now focused on the June reading of the personal consumption expenditures price index – the Fed’s main inflation measure, which is due on Friday.

“Once we have normalized our supply chains, there won’t be much of this inflation pressure, which can be achievable in the next six months, but the spread of the Delta variant is a wild card, which could derail the recovery process,” said Arthur Weise, chief investment officer at Kingsland Growth Advisors.

At 9:42 a.m. ET, the Dow Jones Industrial Average was up 0.49 per cent, the S&P 500 was up 0.44 per cent, and the Nasdaq Composite was up 0.36 per cent.

Trading in the shares of technology behemoths Apple Inc , Amazon.com Inc, Netflix Inc and Google-parent Alphabet Inc was muted.

The group has tended to underperform the broader market during times of economic optimism, when investors prefer stocks such as mining and energy, which are expected to benefit more from a steady business recovery.

Facebook Inc fell 3.2 per cent as it warned revenue growth would “decelerate significantly” following Apple’s recent update to its iOS operating system that would impact the social media giant’s ability to target ads.

KFC-owner Yum Brands Inc, on the other hand, gained 3.8 per cent after beating expectations for quarterly sales.

China’s Didi Global jumped 14.4 per cent after a report said it was considering going private to placate Chinese authorities and compensate investor losses since the ride-hailing firm listed in the United States. Didi denied what it called a “rumor” that it could go private.

Focus later in the day will be on shares of Robinhood Markets Inc, which is scheduled to start trading on the Nasdaq under the ticker “HOOD” after the company raised US$2.1 billion in its initial public offering on Wednesday.

Advancing issues outnumbered decliners 3.36-to-1 on the NYSE and 2.52-to-1 on the Nasdaq.

The S&P index recorded 40 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 10 new lows. — Reuters

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