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Major stock indexes hit new highs on Friday after a better-than-expected jobs report joined the boom in corporate earnings to fuel investor confidence, pushing up stocks in sectors hit hard by the pandemic despite growing fears that an increase in Covid-19 cases could stifle the recovery economy.
The S&P 500 is up 20% this year, and Goldman Sachs expects it to rise another 7% by the end of the year.
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Highlights
The S&P 500, which closed at a record high on Thursday, hit an intraday high shortly after 1:00 p.m. EDT on Friday, climbing 0.2% to 4,440 as retailers and financial giants such as Macy’s, Charles Schwab and Wells Fargo have jumped between 4% and 5% each.
The Dow Jones Industrial Average climbed nearly 0.5% to 35,256 points, breaking a July 26 closing record on the back of the surge in Goldman Sachs and JPMorgan stock prices, which topped the index with gains of 3% each.
Despite the strength of the broader market, the tech-rich Nasdaq fell 0.4% to 14,833, penalized by the sale of large tech stocks including Tesla, Amazon and Apple, which fell by 1 , 7%, 1.2% and 0.6%, respectively.
Epicenter stocks, those hardest hit by the pandemic, are seeing a “rapid recovery as activity normalizes,” wrote Vital Knowledge Media founder Adam Crisafulli , in a note on Friday, highlighting gains in leisure, hotel and restaurant jobs that boosted the best of July. – employment report than expected.
Morgan Stanley’s monthly survey of 2,000 U.S. consumers found that concerns about Covid-19 – and in particular that the delta variant surge could delay leisure and travel activities – have outweighed concerns about the inflation for the first time since April, the investment bank said in a note on Friday. .
However, Crisafulli said the epicenter companies were “generally quite optimistic” about the market in their second quarter earnings releases this week, predicting further improvement despite the increase in Covid-19 cases spurring new mask mandates and tighter restrictions across the country.
Key context
Nearly 450 of the S&P’s 500 companies posted second-quarter earnings through Friday afternoon, and 87% of them beat analysts’ average earnings and revenue estimates, better than all eight previous quarters except two, according to data from Refinitiv.. “In the end, the income won out over everything,” Crisafulli said on Friday. “It’s very difficult for the market to be affected, even with the delta variant issues, when companies are showing numbers as spectacular as the second quarter.” So far, the S&P is up 20% this year, beating the gains of the Dow and Nasdaq by around 16% each.
Surprising fact
The S&P 500 hasn’t fallen 5% or more in almost 10 months, “an unusually long period without a massive sell-off,” said Callie Cox, senior investment strategist for Ally Invest. “At the same time, this market has proven to be resilient,” she adds, recommending actions in sectors like healthcare that have been “neglected for much of the recovery”.
Tangent
In a note on Thursday, Goldman Sachs analysts raised their S&P year-end price target to 4,700, which would represent a 7% gain from current levels, citing exploding corporate profits in the past. second trimester as largely responsible for the increase. The investment bank says the downside economic risks of the delta variant appear only “modest” in the near term, even as the US is experiencing a resurgence of the virus similar to that in the UK, where the new cases have recently stabilized after increasing at their fastest rate. since January. Led by economist Jan Hatzius, the researchers argue that widespread vaccination should protect against serious infections, and they point out that consumer spending and economic activity have largely slowed during the wave of infections caused by variants in the Kingdom. -United.
Further reading
New jobs jumped by nearly a million in July as unemployment rate drops to 5.4%, better than expected (Forbes)
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