S&P 500 on Course for New High
30 April 2021 - 6:37AM
Dow Jones News
By Anna Hirtenstein and Paul Vigna
U.S. stocks jumped Thursday as investors cheered encouraging
data on the economy, a strong batch of corporate earnings and the
prospect of as much as $1.8 trillion in new government
spending.
The Dow Jones Industrial Average gained 0.7%, while the S&P
500 added 0.7% to close at a fresh record. The Nasdaq Composite
climbed 0.2%.
Stocks rose early, but then fell into the red as bond yields
jumped, repeating the recent pattern of intraday swings. Such
volatility isn't unusual given the market's current state, said
Katerina Simonetti, senior vice president at Morgan Stanley Private
Wealth Management.
"Naturally there's a certain level of apprehension," she said,
pointing to the size and pace of stocks' gains. At some point,
growth in the economy and markets have to slow down, she added.
The morning provided investors with fresh signs of the economy's
recovery. The U.S. economy grew at a 6.4% rate in the first
quarter, approaching its pre-pandemic size, and weekly jobless
claims fell to their lowest level since the pandemic began last
year.
The economy is getting a boost from two main sources, said Nancy
Vanden Houten, the chief economist at Oxford Economics. One is the
receding pandemic -- at least in the U.S. -- and the reopening of
the economy, and the other is the stimulus efforts from both the
federal government and Federal Reserve.
"We're on a really good path here," she said, while
acknowledging a full recovery is still a long way off, a sentiment
echoed by the Federal Reserve itself on Wednesday.
A fresh boost could come in the form of a new federal stimulus
program. President Biden outlined proposals Wednesday for his new
American Families Plan, which would boost spending on child care,
education and paid leave. Investors' optimism was also buoyed after
Federal Reserve Chairman Jerome Powell said the central bank would
continue supporting the economy, while noting signs that growth has
revived and the labor market is strengthening.
"In this environment, it is very difficult to be bearish," said
Gregory Perdon, co-chief investment officer at private bank
Arbuthnot Latham.
A high level of household savings is morphing into consumer
spending as the economy reopens and will also deliver a boost, he
added. "I struggle to see any factor over the course of the next
six months that would outweigh this ready-steady-spend
narrative."
Mr. Powell on Wednesday said the recent rise in inflation
largely reflected "transitory factors," and that the Fed would hold
rates steady until the labor market is back to full strength and
inflation has reached the central bank's goal of averaging 2%. His
comments helped reassure markets that the Fed won't shift course
abruptly.
"They are going to let the economy run hot," Mr. Perdon said.
"The prospect of there being a tightening in the very near term is
just not on the table."
Earnings season is in full swing, with Amazon.com and Twitter
slated to post results after market hours. In afternoon trading,
Amazon rose 0.2% and Twitter dropped 1%.
Apple shares rose 0.6% after reporting that quarterly profit
more than doubled to a record and saying it expects the surge in
sales to continue. Facebook jumped 7.2% after it reported a boom in
its ad business that drove revenue and profit sharply higher.
EBay tumbled 10% -- on course for its worst one-day loss since
2016 -- after saying it expects earnings for the current quarter to
miss analysts' expectations. Qualcomm rose 4.2% after reporting a
jump in revenue boosted by high demand for 5G phones. Comcast
gained 4.3% after it posted a 55% rise in quarterly profit.
In the bond market, the yield on the 10-year Treasury note rose
as high as 1.688%, its highest intraday level in more than two
weeks, from 1.621% on Wednesday. It was most recently at 1.645%.
Prices fall when yields rise.
"Growth is accelerating in most of the developed world," said
Salman Baig, multiasset investment manager at Unigestion. "This
environment of good growth and significant building inflationary
pressures is a very negative environment for government bonds."
The rise in yields, which were as low as 0.915% at the start of
the year, has curbed investor appetite for technology stocks, which
often are afforded high price tags based on expectations of growth
far into the future. The S&P 500's technology sector slipped
0.1%, one of only two declining sectors of the index's 11
groups.
Overseas, the pan-continental Stoxx Europe 600 fell 0.3%. The
Shanghai Composite Index advanced 0.5%, and Hong Kong's Hang Seng
added 0.8%.
Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Paul
Vigna at paul.vigna@wsj.com
(END) Dow Jones Newswires
April 29, 2021 16:22 ET (20:22 GMT)
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