Dow and S&P end at
500
The stock market recorded a new highs on last Thursday.
The Standard & Poor's 500, the Dow Jones industrial
average and the Russell 2000 index set all-time highs. The S&P broke
through 1,700 points for the first time. The Nasdaq hit its highest level since
September 2000.
The gains were driven by a steady flow of encouraging, if
incremental, reports on the global economy.
Overnight, a positive read on China's manufacturing helped
shore up Asian markets. Then, an hour before US trading started, the government
reported that unemployment claims fell last week. At mid-morning a trade group
said US factories revved up production last month. And while corporate earnings
news brought both winners and losers, investors were able to find enough that
they liked in companies including CBS, MetLife and Yelp.
"It's just a lot of things adding up," said
Russell Croft, portfolio manager of the Croft Value Fund in Baltimore.
"It's hard to put your finger on why exactly, but basically it's a bunch
of pretty good data points coming together to make a very good day."
Overall, analysts said, the news was good but not
overwhelmingly so. Enough to suggest that the economy is improving, but not
enough to prompt the Federal Reserve to withdraw its economic stimulus
programs.
Earnings results covered a wide range. Boston Beer, which
makes Samuel Adams, and home shopping network operator HSN rose after beating
analysts' estimates for earnings and revenue. Kellogg, health insurer Cigna and
cosmetics maker Avon were down after beating earnings predictions but missing
on revenue.
It's becoming a familiar template this year. Stock indexes
have been setting record highs even while the underlying economy is more often
described as decent, but hardly going gangbusters.
Take company earnings, the most important thing for stock
investors. Earnings at S&P 500 companies are up 4.3 percent this quarter,
and revenue is down 0.4 percent, according to S&P Capital IQ. In previous
eras, that hardly would have been considered encouraging. In the second quarter
of 2007, before the financial crisis imploded, earnings rose 8.7 percent and
revenue was up 5.8 percent. But compared with the second quarters of 2008 and
2009, when earnings plunged more than 20 percent each time, this year's results
look positively cheery.
Other economic indicators have been following a similar
fashion of not too good, not too bad. While layoffs are steadily declining,
companies aren't hiring as quickly as they did before the crisis. The economy
is growing, but not fast enough to drive significant job growth. TheCommerce
Department reported this week that the US grew at a tepid annual rate of 1.7
percent in the second quarter.
"They're not great numbers, but they're positive and
they're continuing to grow," said Tim Courtney, chief investment officer
of Exencial Wealth Advisors in Oklahoma City. "That's about all the market
needs to hear."
The S&P 500 index rose 21.14 points, or 1.3 percent, to
1,706.87. The Dow rose 128.48 points, or 0.8 percent, to 15,628.02. The Russell
2000 of small-company stocks rose 14.62 points, or 1.4 percent, to 1,059.88.
The Nasdaq composite index rose 49.37 points, or 1.4
percent, to 3,675.74, in line with the daily gains of other indexes but not
near its record. The Nasdaq, which is heavily weighted with technology stocks,
briefly veered above 5,000 points in March 2000, just before the Internet
bubble burst.
Investors said on Thursday that the S&P's crossing over
1,700 points might give consumers a psychological boost, but they were hardly
crowing about a new era in stocks. Turns out it's quite common for indexes to
hit records. Since 1950, the S&P has hit a new high about 7 percent of the
time, or an average of about every 15 days, Courtney said. The S&P's last
record close was not so long ago, on July 22.
"You've got a disconnect here between the real economy
and ... the stock markets," said Brad McMillan, chief investment officer
for Commonwealth Financial Network in Waltham, Mass. McMillan noted that while
many companies were beating earnings expectations, they've also been trimming
staff and lowering their own estimates.
The S&P made the jump from 1,600 to 1,700 in less than
three months. The index first traded above 1,600 on May 3. The previous
100-point gain took much longer to achieve: The S&P first closed above
1,500 in March 2000.
The market's sharp advance Thursday was a stark contrast
with the previous two days, when the S&P 500 moved less than a point each
day. On Tuesday, investors didn't want to make big moves ahead of the Federal
Reserve's policy announcement the next day. On Wednesday, the Fed didn't make
much news after all. The central bank said, unsurprisingly, that the US economy
was recovering but still needed help. The Fed didn't give any indication of
when it might cut back on its bond-buying program, which has been supporting
financial markets and keeping borrowing costs ultra-low.
Among the economic and corporate news that investors
digested on Thursday:
- China's purchasing managers' index - a gauge of business
sentiment - rose to 50.3 in July from 50.1 in June. Analysts had expected a
modest decline below 50.
- The Labor Department said that the number of Americans
applying for unemployment benefits fell 19,000 to 326,000. That was the fewest
since January 2008.
- The Institute for Supply Management, a trade group of
purchasing managers, said its index of manufacturing jumped to 55.4 in July, up
from 50.9 in June. A reading above 50 indicates growth.
- Auto companies reported healthy sales gains for July.
Ford, Chrysler and Nissan each reported US sales growth of 11 percent compared
with the same month a year ago.
An index of transportation stocks also rose sharply. Many
investors see that sector as a leading indicator for the economy since freight
and shipping companies tend to get busier as the economy improves.
The Dow Jones Transportation average jumped 208.26 points,
or 3.2 percent, to 6,670.06, led by a surge in Con-way, a Michigan-based
freight company that reported earnings Thursday that were far higher than
investors expected. Con-Way rose $4.34, or 10.5 percent, to $45.79.
The price of crude oil rose $2.86, or 2.7 percent, to
$107.89 a barrel. Gold slipped $1.80 to $1,311.20 an ounce. The dollar rose
against the euro and the Japanese yen.
The yield on the 10-year Treasury note rose sharply, to 2.72
percent from 2.58 percent late Wednesday. That means investors were selling US
government debt securities, which are seen as ultra-safe, in anticipation that
the economy would pick up and as they moved money into higher-risk assets like
stocks.
Among stocks making big moves:
-Sprouts Farmers Markets more than doubled on the company's
first day of trading, jumping $22.11 to $40.11 - another sign that investors
are becoming more comfortable taking on risk.
-Yelp soared $9.70, or 23.2 percent, to $51.50. The consumer
review website continued to lose money, but it sold more ads and drew more
visitors.
-Dell rose 29 cents, or 2.3 percent, to $12.96. Its
shareholders are scheduled to vote Friday on an offer by CEO and founder
Michael Dell to buy the company.
-Exxon Mobil fell $1.02, or 1.1 percent, to $92.73, after
reporting lower earnings as oil and gas production slipped. Profit margins on
refining oil also fell.
Source : TimesofIndia.com
