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The Dow Jones Industrial Average soared Thursday afternoon, after a group of bipartisan lawmakers agreed to a deal on infrastructure spending. Investors were also shaking off signs the Federal Reserve is growing more concerned about inflation.
By Thursday afternoon, the Dow was up 1%. Meanwhile, the
was up 0.6%, at 4,267 points, and the
was up 0.7%, at 14,352 points. Both the S&P 500 and the Nasdaq Composite were higher than their record closes of 4255.15 and 14,271.73 points, respectively.
Before the deal was announced, the Dow had been trailing the Nasdaq Thursday morning. The infrastructure spending package could provide a moderate boost to the economy–and lift the earnings of the more economically-sensitive value stocks, which the Dow is heavily comprised of.
“Value seems to be benefiting most from this news,” writes Brian Price, head of investment management for Commonwealth Financial Network.
The deal could come out to roughly $1 trillion–and could provide a new revenue stream for some construction companies and manufacturers. Construction company MasTec (MTZ), for example, saw shares rise 3.3%. Martin Marietta Materials (MLM) rallied 2.7%.
Other manufacturers saw their shares pop.
(CAT) and
(DE) rose 3.4% and 1.6%, respectively.
That positive news offset lackluster data on jobs. Initial claims for unemployment benefits came in at 411,000, only a slight improvement from last week’s 412,000 and worse than estimates of 380,000.
The S&P 500 declined 0.1% on Wednesday when Atlanta Fed President
Raphael Bostic
and
Fed Gov. Michelle Bowman
said it may take longer than expected for inflation to fade.
The market, however, doesn’t seem all that worried: most stocks are participating in the rally, suggesting broad-based enthusiasm. About 79% of S&P 500 stocks were in the green, according to FactSet data.
Volatility is also falling, another sign of calm in the market. The
Volatility Index hit 15.6 Thursday and was as low as 14.19. That’s below the intraday low hit on February 19, 2020, the day the S&P 500 hit a peak before investors began digesting the pandemic’s onset. The volatility index has trended down from a pandemic-era peak of 60 in late March 2020.
Developed world central banks, including the Fed, “have no intentions yet to ‘normalize’ policy because they are afraid and are all in on ‘transitory,’” writes
Peter Boockvar,
chief investment officer at Bleakley Advisory Group. Simply put, the Fed may see the recent inflation has temporary and is in no rush to raise rates.
Adding to the narrative that the Fed isn’t posing a threat to markets, New York Fed President
John Williams
said Thursday that rate hikes are still far in the future and that inflation is expected to moderate next year.
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Durable-goods orders rose 2.3% month over month in May, falling short of the anticipated gain of 2.8%. “Rising durable goods orders are a positive sign that supply constraints have not deterred demand,” wrote Andrew Hollenhorst, a Citigroup economist.
In Asia, the
ended flat while leading indexes in Seoul and Hong Kong registered small gains.
The
rose 0.9%. The German Ifo business climate index reached its highest level in more than two years in June, and a French business climate index rose to its highest level since 2007, according to data released on Thursday.
Among individual stocks,
(MSFT) will be in the spotlight, as the software giant holds a presentation of its Windows 11 operating system. The stock was up 0.7% in late morning trading.
E-commerce platform
(EBAY) rose 1.5% after it said it is selling an 80% stake in its South Korean unit to retailer E-mart for about $3 billion.
Darden Restaurants (DRI) stock rose 3.4%. The company reported a profit of $2.03 a share, beating forecasts for $1.79 a share, on sales of $2.28 billion. Wall Street had expected sales of $2.19 billion.
MGM Resorts International (MGM) stock gained 2.7% after getting upgraded to Buy from Hold at Deutsche Bank.
Seagate Technology (STX) stock gained 1.4% following an upgrade to Outperform from Market Perform at Northland Capital.
Credit Suisse (CS) stock gained 3.5%. Berenberg lifted its call on the stock to Buy from Hold.
Dollar Tree (DLTR) stock dropped 2.7% after getting downgraded to Neutral from Overweight at Piper Sandler.
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