Tech firms’ profits push market higher
More blowout profit reports from big tech companies pushed the S&P 500 to an alltime high Wednesday.
The benchmark index rose 1%, even though most of the stocks within it closed lower. Technology stocks accounted for the lion’s share of the gains, outweighing losses in health care, utilities, energy and other sectors.
The S&P 500 has been notching record highs this month, adding to its remarkable turnaround this year from a nearly 34% skid this spring as the pandemic ravaged the economy. While the market’s movements have remained almost relentlessly upward in recent weeks, powered largely by big technology stocks, its momentum has slowed. Recent data reports have shown a mixed picture on the economy, where activity has largely slowed after its initial rebound from its plummet into recession.
Still, the latest economic data provided more reason for investor optimism. The Commerce Department said Wednesday that orders for transportation equipment, computers and other longlasting goods jumped more in July from June than economists expected. One closely watched number in the report, which gives an indication of business investment plans, rose 1.9% in July.
“The economy continues to show signs of recovery,” said Patrick Schaffer, global investment specialist at J.P. Morgan Private Bank. “Virus containment strategies seem more targeted and less blunt than they were in the initial phases” of the pandemic.
The S&P 500 gained 35.11 points to 3,478.73. The Dow Jones industrial average rose 83.48 points, or 0.3%, to 28,331.92. The Nasdaq composite, which is heavily weighted with technology stocks, climbed 198.59 points, or 1.7%, to 11,665.06, its thirdstraight record high. Smaller companies struggled. The Russell 2000 index of smallcap stocks fell 11.02 points, or 0.7%, to 1,560.19.
On Thursday, the market will pay close attention as Federal Reserve Chairman Jerome Powell gives a highly anticipated speech on monetary policy as part of the Fed’s annual economic symposium, which is usually held in Jackson Hole, Wyo., where past Fed officials have made big marketmoving announcements.
Many investors expect Powell to talk about inflation, as well as the importance of Congress delivering more aid for the economy after much of its last round of stimulus expired. Many investors assume that Congress will eventually reach a deal, hung up on partisan disagreements.
The Fed has been one of the primary reasons for the stock market’s return to a record, after it pledged to keep shortterm interest rates at their record low and to continue to buy bonds to support the economy.
“I think the Fed is going to continue to go all in,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, noting that the central bank is also increasingly serious about wanting to boost inflation.
“The speculation is they’ll move to an average inflation target, which will let inflation run hot for awhile,” he said.
The yield on the 10year Treasury rose to 0.69% from 0.68% late Tuesday. It’s been climbing in recent weeks, up from 0.53% at the end of July, and it tends to move with investors’ expectations for the economy and inflation.
If yields move high enough, it could rattle the stock market because higher rates can draw investors back into bonds and away from stocks. The recent ultralow rates have helped technology and other highgrowth stocks in particular. But analysts say the 10year Treasury yield would need to get closer to 1% to drive real concerns.
The latest tech stock to be minted a blue chip surged 26%, making it the biggest gainer in the S&P 500, after giving a profit report for its latest quarter that Wall Street analysts called “stupendous.” San Francisco’s Salesforce will join the Dow Jones industrial average when trading begins on Monday, replacing Exxon Mobil in the measure of 30 bluechip stocks.
Two San Jose companies also had a good day, with Adobe up 9.1% and Hewlett Packard Enterprise adding 3.6%.
Tech stocks in the S&P 500 accounted for more than 57% of the S&P 500’s overall gain. It continues a longstanding run on Wall Street, where investors continue to pile into companies that can deliver strong growth even if the economy is weak or quarantined.
“The market is just reflecting how the world has changed and how these (tech) companies are better positioned to take advantage of it,” McMillan said.
Cruise line operators were among the biggest decliners Wednesday. Norwegian Cruise Line fell 6.1%, while Carnival dropped 3.8%.
The German DAX was up 1%, and the French CAC 40 rose 0.8%. The FTSE 100 in London added 0.1%. Asian markets made mostly modest moves. Japan’s Nikkei 225 and Hong Kong’s Hang Seng indexes were virtually flat, and South Korea’s Kospi added 0.1%. Stocks in Shanghai fell 1.3%.
Benchmark U.S. crude oil for October delivery rose 4 cents to $43.39 per barrel Wednesday. European benchmark Brent crude oil for October delivery fell 22 cents to $45.64 per barrel. Oil prices have been rising as Hurricane Laura barrels toward the Gulf Coast, potentially putting energy production at risk.