Supportive economic data such as a drop in jobless claims and continued rise in industrial activity helped U.S. stocks move marginally higher Thursday, with the S&P 500 index extending its run into record territory. What is the current state of equity benchmarks?
At 34,614, the Dow Jones Industrial Average DJIA, +0.31 percent was up 112 points, or 0.3 percent.
The S&P 500 SPX, +0.46 percent increased 21 points, or 0.5 percent, to 4,319 points.
The Nasdaq Composite COMP, +0.06% increased 15 points, or 0.1 percent, to 14,519 points.
The S&P 500 advanced 5.70 points, or 0.1 percent, to 4,297.50 on Wednesday, surpassing its total number of record finishes in 2020; the Dow finished 210.22 points higher at 34,502.51, a gain of 0.6 percent, bringing the blue-chip benchmark within 1% of its May 7 record close of 34,777.76. The Nasdaq Composite Index dropped 24.38 points, or 0.2 percent, to 14,503.95, its lowest level in three sessions.
What is the market’s driving force? Cyclical companies such as oil, financials, and industrials drove the S&P 500 higher, with the index on track to set a sixth straight record finish, while technology stocks lagged. The economy is rebounding from the COVID pandemic, but there are still concerns about the job market and inflation, which might undermine the optimistic feeling that has kept all three major stock indexes at or near all-time highs following their best first-half performances since 2019. The monthly payroll data from the Labor Department will be the main issue in terms of measuring the pace of the economic recovery on Friday. The Federal Reserve has recently emphasized the importance of reclaiming lost jobs in order to help the economy recover from COVID. In an interview with MarketWatch, Peter Cardillo, chief market analyst at Spartan Capital, said, “The big question mark is going to be the participation rate and, even more importantly, what the hourly wage expenses are.” “I don’t see the participation rate changing substantially, and it’s likely to remain stable at recent levels. However, an increase in hourly wages is possible, which might be a negative for the bond market.” See: The United States may have added 700,000 new jobs in June, but millions of others remain unemployed. According to Labor Department data released on Thursday, first-time jobless claims declined to 364,000 last week from 411,000 the week before. Economists predicted a drop to 380,000. The figures come after ADP released a better-than-expected update on private-sector job growth on Wednesday. About the weekly drop in unemployment claims, Cliff Hodge, chief investment officer for Cornerstone Wealth, said, “Not only did we publish the lowest number since the pandemic began, but it also reverses the trend on misses that we’ve seen in the prior several weeks.” “Staying below that big-round-number [400,000] mark could boost risk-taking confidence during the dog days of summer,” he said. Meanwhile, the final reading of IHS Markit’s June manufacturing PMI in the United States was 62.1, down from a flash estimate of 62.6 but unchanged from the May final figure. The more closely watched manufacturing index from the Institute for Supply Management fell to 60.6 percent in June from 61.2 percent in May, coming in slightly below Wall Street expectations. A result of higher than 50 shows that activity is increasing. In a note, James Knightley, chief international economist at ING, said, “Make no mistake, this is an exceptionally strong report where anything above 50 is in growth zone.” He reported that the production index increased to 60.8 from 58.5, which was surprising given the well-known supply chain difficulties. The statistics revealed that manufacturers are still overwhelmed with orders, but are having difficulty meeting them due to labor shortages and supply bottlenecks. “New orders continue to stream in, as evidenced by a 66.0 reading, but the backlog of orders continues to grow, albeit at a lesser rate than in May,” Knightley said. “This implies supplier delivery times are getting longer as customers become more frantic for supply, as evidenced by another sharp drop in inventories.” According to the US Commerce Department, construction spending declined 0.3 percent in May to $1.55 trillion on a seasonally adjusted yearly basis. The Wall Street Journal polled economists, who predicted a 0.5 percent increase. Crude oil prices rose on Thursday as members of the Organization of Petroleum Exporting Countries and their allies, known as OPEC+, convened and agreed to increase output by about 500,000 barrels per day starting in August. As the global economy gathers traction, this increase is projected to be easily absorbed by the market. The stock of Chevron CVX, +1.48 percent increased by more than 1.0 percent, making it one of the Dow’s best performers. See: According to a renowned economist, oil might reach $100 as the commodities boom swings away from China. According to a report released on Thursday by the nonpartisan Congressional Budget Office, the US budget deficit would reach $3 trillion in fiscal year 2021. According to the CBO, the shortfall would be 13.4% of GDP, the second-largest since 1945, reflecting congressional fiscal stimulus to aid the economy’s recovery from the pandemic. In public health news, the World Health Organization announced that a 10-week reduction in new COVID cases in Europe has ended, with cases increasing by 10% last week. According to the Guardian, WHO regional director for Europe Hans Kluge said the spike is due to reduced regulations and increasing mobility, and that if discipline isn’t maintained, a new wave will arise. Which businesses are being scrutinized?
On Thursday, Robinhood Markets, the popular trading app that grew in popularity during the pandemic, filed for an initial public offering on Nasdaq under the ticker name “HOOD.” The company has 17.7 million monthly active users and $81 billion in assets under care, according to the registration paperwork.
Shares of McCormick & Co. MKC declined 0.1 percent after the spice and flavorings producer topped expectations for the fiscal second quarter and upped guidance.
MKS Instruments Inc. is a company that manufactures instruments.
MKSI announced on Thursday that it has struck an agreement to buy Atotech Ltd. ATC in a cash-and-stock deal worth $5.1 billion in equity and $6.5 billion in enterprise value.
MKS stock dropped 3.8 percent, while Atotech stock dropped 1.5 percent.
Elliott Management has called on GlaxoSmithKline GSK, +0.75 percent to appoint new directors to its board of directors and launch a process to determine the future of Emma Walmsley, the company’s troubled CEO.
Late Wednesday, Krispy Kreme Inc. DNUT, +17.76 percent priced its initial public offering at $17 per share, well below the estimated range of $21 to $24 per share. The stock debuted on Nasdaq on Thursday, with a gain of 18.6 percent under the ticker code “DNUT” DNUT.
NIO Inc. NIO, -4.38 percent, a Chinese electric car firm, saw its stock drop 4.7 percent after the business announced that it delivered 8,083 vehicles in June, increasing 116.1 percent over the same month a year ago.
Shares of General Motors Co. GM, -0.17% were down 0.3 percent after the automaker announced that it sold 688,236 vehicles in the second quarter, up 40% from pandemic-reduced levels a year ago.
What are the trends in other markets?
The 10-year Treasury note yield, TMUBMUSD10Y, 1.465 percent, increased 3 basis points to 1.47 percent. The yield curve and the price of debt move in opposite directions.
The ICE U.S. Dollar Index DXY, +0.14%, which measures the currency against a basket of six main competitors, was up 0.2 percent.
After OPEC+ postponed a decision on whether to increase output beginning next month, the US oil benchmark CL00, +1.74 percent was up 2.1 percent at $75.01 a barrel. Gold futures GCQ21, +0.21 percent gained $5.20, or 0.3 percent, to settle at $1,776.80 per ounce.
In European shares, the Stoxx 600 Europe SXXP, +0.62 percent gained 0.6 percent, while London’s FTSE 100 UKX, +1.25 percent gained 1.2 percent.
In Asia, the Shanghai Composite SHCOMP, -0.07% was down 0.1 percent, while Japan’s Nikkei 225 NIK, -0.29% was down 0.3 percent.
Mark DeCambre contributed to the story./n
