Tech company gains help push S&P 500 to record high
Wall Street capped another week of gains with more milestones today, as strength in technology and health care stocks helped push the S&P 500 and Dow Jones Industrial Average to all-time highs.
The S&P 500 rose 0.8% for its fourth record high this week and third straight weekly gain. The Dow’s latest milestone followed an all-time high on Monday.
Stocks have benefited this week as bond yields, which had been steadily ticking higher, retreated from highs hit earlier in the month. Higher yields can slow down the economy by pushing up interest rates, making it more expensive for people and businesses to borrow money. Bond yields rose today, but that didn’t weigh on stocks.
“The S&P 500 finished at another all-time high today as investors have become comfortable enough with the current level of interest rates and inflation to keep putting money into equities,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.
A late-afternoon burst of buying pushed the major stock indexes higher. The S&P 500 rose 31.63 points to 4,128.80. The Dow gained 297.03 points, or 0.9%, to 33,800.60. The Nasdaq composite picked up 70.88 points, or 0.5%, to 13,900.19.
Small company stocks, which have outgained the broader market this year, lagged behind today. The Russell 2000 index of smaller companies inched up 0.88 points, or less than 0.1%, to 2,243.47. Still, the index is up 13.6% so far this year, while the S&P 500, which tracks large companies, is up 9.9%.
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Big Tech stocks were among the better performers. Apple rose 2%, Microsoft gained 1% and Intel added 1.8%. Health care companies also helped lift the market. UnitedHealth climbed 3.1% and Cigna rose 3.3%.
Financial companies also rose, aided by the rise in bond yields, which translates into higher interest rates lenders can charge on mortgages and other loans. State Street gained 2.4% and Wells Fargo added 1.2%.
The yield on the 10-year U.S. Treasury note, which influences interest rates on mortgages and other loans, rose to 1.66% from 1.63% late Thursday. It had been as high as 1.75% on Monday.
Most analysts expect inflation to increase as the economy improves.
“We’re seeing some evidence of inflation creeping into the market place, but it’s not problematic,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management.
The market’s latest gains are in line with the market’s upward tack this week as investors weigh concerns about the virus tripping up a steady economic recovery against progress in vaccinations and business re-openings.
Investors are showing cautious optimism about the economic recovery, especially in the U.S., where vaccine distribution as been ramping up and President Joe Biden has advanced the deadline for states to make doses available to all adults to April 19.
“There’s optimism on the horizon that overall economic growth will continue as the year unfolds,” Sandven said.
But it’s clear the recovery has a long way to go. The number of Americans who filed for unemployment benefits last week rose again last week, as many businesses remain closed or partially shut down due to the pandemic.
In remarks to the International Monetary Fund Thursday, Federal Reserve Chair Jerome Powell said a number of factors are putting the nation “on track to allow a full reopening of the economy fairly soon.”
Investors will turn their attention to quarterly results next week, when earnings season gets underway. The major banks are among the first to report their results, including JPMorgan, Wells Fargo and Bank of America. Analysts polled by FactSet have hiked their profit forecasts during the quarter. They expect growth of just over 24%, compared with the view back in September that companies in the S&P 500 would see 13% growth.
“On balance, we’re seeing earnings accelerate to provide valuation support,” Sandven said.