The Atlanta Journal-Constitution
STOCK INDEX SETS RECORD
Defying the pandemic’s mounting toll, the S&P 500 closed Tuesday at a record high,
The S&P 500 climbed to a record Tuesday, reaching a level few would have predicted a few months ago and defying the economic storm facing the United States.
What happened?
The day’s move was a relatively mild one, nudging the index up 7.79 points, or 0.2%, to 3,389.78. That eclipses the S&P 500’s previous record closing high of 3,386.15, which was set Feb. 19, before the pandemic shut down businesses around the world and knocked economies into their worst recessions in decades.
The S&P 500’s milestone caps a furious, 51.5% rally that began in late March. The index, which is the benchmark for many stock funds at the heart of 401(k) plans, is now up nearly 5% for the year.
The recovery has been fueled by trillions of dollars pumped into financial markets by the Federal Reserve and enormous spending by the government to protect American workers and businesses from the worst of the downturn.
A run-up in shares of technology giants that, because of their sheer size, hold sway over the entire market, has also propelled the stock index. Put together, these factors drove a recovery that was so quick that the bear market — defined as a drop of more than 20% — that began earlier this year turned out to be the shortest ever, according to records going back to 1929.
The high Tuesday comes despite the drastic economic toll of the virus, which dragged the U.S. economy into one of the steepest downturns since the Great Depression, crushed corporate earnings and sent unemployment soaring.
Why it happened
Investors have largely shrugged off such concerns and focused instead on economic updates that have not been quite as catastrophic as expected.
Last week’s retail sales data showing that Americans kept shopping in July, even as coronavirus infections continued to spread, was followed Tuesday by strong earnings reports from Walmart and Home Depot. Separately, the Commerce Department said that construction of new homes in the United States surged nearly 23% in July to the highest annual pace since February.
That focus on the good news has helped lift the S&P 500 by more than 50% from its low point in March.
Technology stocks have played a big role in those gains. Companies such as Apple, Alphabet and Microsoft have attracted investors despite the deep downturn in the United States, with buyers betting that those companies are poised to thrive in a stay-at-home economy and emerge from the crisis in an even stronger competitive position.
On Tuesday, Amazon was the best-performing stock in the S&P 500, rising 4%, with shares of a number of other technology companies — including Adobe and Salesforce — also climbing.
What risks lie ahead
Still, the march higher has also meant that investors have looked past a number of risks that lie ahead. Most prominent among them this week is the inability of lawmakers in Washington to reach a consensus about another economic aid package.
Another is the latest escalation in tensions between the United States and China. The Trump administration said Monday that it would restrict the ability of Chinese tech giant Huawei to buy a wider array of chips made or designed with American equipment and software.