Stocks rally on hopes, low rates
It’s the market that continues mostly upward, even though there’s still plenty to worry about.
The Dow Jones Industrial Average and the Nasdaq closed at record highs yet again on Tuesday, and the S&P 500 closed barely below the alltime high it reached a day earlier.
In Tuesday’s trading, the Dow climbed 30.52 points, or 0.1 percent, to 27,492.63, the S&P 500 fell 3.65 points, or 0.1 percent, to
3,074.62 and the Nasdaq composite rose 1.48 points, or less than
0.1 percent, to 8,434.68.
The gains in recent weeks have been driven by company earnings that haven’t been nearly as terrible as Wall Street was expecting, interest rate cuts, hopes for a trade truce and a steadily growing economy. In all, the S&P 500 is up 22.7 percent so far this year, putting it on pace for its best year since 2013.
The upbeat mood marks a pivot from the summer, when worries about trade, Britain’s potentially messy exit from the European Union and the slowing global economy loomed over the market.
Here’s a closer look at the factors that have been sending the U.S. stock market to record highs this fall.
Wall Street got through the bulk of thirdquarter earnings season last week, and the results were much better than what investors had been anticipating.
As of Friday, 71 percent of the members of the S&P 500 index have reported their results, and
76 percent of them have reported betterthanforecast results, according to FactSet. Also, 61 percent have reported higher than expected sales, which is important in the wake of concerns about an economic slowdown and the U.S.China trade war.
This doesn’t mean earnings have been stellar. Expectations were low this quarter, and on a whole, profits in the S&P 500 are down 2.7 percent from a year ago, according to FactSet. But since companies are beating investors’ mediocre expectations, it’s provided the market with a base on which to rally upon.
“Of course, any decline is not good news,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, in a note to investors. “But the fact that it is smaller than expected is positive—and earnings are expected to resume growth in the fourth quarter.”
The U.S. economy has repeatedly defied fears of a recession, which had resurfaced in late summer and early fall as trade tensions escalated. Reports on jobs, growth and consumer confidence in the past couple of weeks have pointed to an economy that is overcoming global threats and expanding for a recordlong 11th straight year.
Last week, the government estimated that employers added
128,000 jobs in October. It was a modest gain, but the figure was depressed by the temporary loss of about 50,000 striking GM workers and the subtraction of
20,000 shortterm Census jobs. Excluding those drags, the job gain would have been much higher. The government also revised up its estimate of job growth for August and September.
Overall, the data suggested that most employers have looked past risks from a global slowdown and the U.S.China trade war, threats that had caused much concern just a couple of months earlier. Over time, increased hiring tends to fuel consumer spending, which, in turn, could help lift corporate earnings and share prices.
The government also said last week that the nation’s gross domestic product, the broadest gauge of economic growth, expanded at a 1.9 percent annual rate in the JulySeptember quarter. Though sluggish, that figure was roughly in line with the average annual growth throughout the expansion that began in 2009. It suggested that the economy remains resilient.
And on Tuesday, an index that measures growth in the economy’s vast service sector — made up of industries ranging from restaurants to banking to health care — rose in October to show solid expansion after having touched a threeyear low in September.
One of the biggest drags on business confidence and investment has been the uncertainty and higher costs injected by the Trump administration’s trade war with China.