Market Snapshot: Dow regains footing higher as S&P 500, Nasdaq Composite looks to extend record ascent

United States

U.S. stock indexes were inching further into record territory midday Wednesday, and a climb for the Dow Jones Industrial Average was gaining some momentum, as the strength of second-quarter corporate earnings offset doubts about the pace of economic recovery with the coronavirus delta variant limiting consumer and business activity in some countries.

What are major stock indexes doing?
  • The Dow Jones Industrial Average DJIA, +0.37% rose 110 points, or 0.3%, at 35,477, supported by gains in financials Goldman Sachs Group Inc. GS, +1.91%, American Express Co. AXP, +3.66%, and JPMorgan Chase & Co JPM, +2.60%.
  • The S&P 500 index SPX, +0.30% was trading 12 points, or 0.3%, higher at 4,498, establishing a fresh intraday record at 4,499.183 boosted by a 1.4% rise in financials SP500.40, +1.69%.
  • The Nasdaq Composite Index COMP, +0.08% traded 17 points, or 0.1%, higher at 15,037, after establishing an intraday all-time high at 15,052.21. But the index was facing headwinds by perkier Treasury yields.

On Tuesday, the Dow climbed 30 points to end at 35,366, while the S&P 500 closed at another daily record at 4,486 and the Nasdaq Composite topped 15,000 points for the first time.

What’s driving markets?

Investors still struggling to find reasons to push equities substantially higher after the S&P 500 index put in its 50th all-time high of 2021 and the Nasdaq Composite closed above a round-number milestone above 15,000 for the first time on Tuesday.

Still, some make the case that strong second-quarter results from American corporations has helped to buoy stock-market optimism.

Of the S&P 500 index companies that have reported second-quarter results, through last Friday, nearly 90% of them delivered results above expectations, marking the highest such tally on record, dating back to 1994, according to data compiled by Refinitiv. Only about 10% have missed estimates. By comparison, on average, since 1994, 66% of companies beat estimates and 20% miss estimates.

“Let’s face it second-quarter earnings are on the books and they are spectacular,” Karyn Cavanaugh, chief investment officer at Carolinas Wealth Management, told MarketWatch in an interview. “I think the bias is to the upside and I think we are going to continue to grind higher,” the CIO said.

Investors though are also concerned about monetary policy and the economic outlook amid a resurgence of new COVID cases as the coronavirus delta variant afflicts some U.S. states. Record-setting trade for equities has also come against the backdrop of rising inflation that has been blamed on supply chain bottlenecks and spiking demand as the economy recovers, though the Federal Reserve has consistently described rising prices as likely transitory.

Federal Reserve Chairman Jerome Powell is not now expected to explicitly declare plans for tapering its asset purchases on Friday at the annual Jackson Hole central bankers symposium which is being held online for the second year in a row.

“This week’s rebound in stocks has been largely predicated on last week’s shift in tone by Dallas Fed President Robert Kaplan, in suggesting he could shift his position on a taper if the economic data deteriorated, a not unreasonable position to take,” said Michael Hewson, an analyst at broker CMC Markets.

In any case, Cavanaugh added that tapering is likely to happen at some point but shouldn’t necessarily squelch bullish momentum. “Tapering is a long way from rising interest rates,” she said, referring to fed funds rates that are at a range between 0% and 0.25%.

In U.S. economic news, orders for durable goods, those lasting at least three years, slipped 0.1% last month for the second time in 15 months, the government said Wednesday, though the fall was largely due to a decline in aircraft orders. Economists polled by the Wall Street Journal had forecast a 0.5% decline. Demand was strong in other parts of the economy despite widespread shortages of materials and labor.

On top of that, House Democrats approved a $ 3.5 trillion budget resolution late Tuesday and advanced the $ 1 trillion bipartisan infrastructure bill, which could be viewed as adding further support to the U.S. economy.

“While the process has been protracted, yesterday showed that the fiscal-stimulus-train remains on track for the U.S. economy for the time being, and we should have a better idea of exactly how large the final package will be in a matter of weeks,” said Henry Allen, an analyst at Deutsche Bank.

In Asia, “risk appetite has weakened with markets trading lower for the most part” noted Allen, highlighting that Japan will extend a state of emergency due to COVID-19 to eight more of its 47 prefectures, bringing the total number under restrictions lasting until mid-September to 21.

A Bank of Japan policy maker also warned that the global semiconductor shortage could last through the rest of 2021 if Southeast Asian factories remain closed due to COVID-19 outbreaks.

Elsewhere, the Ifo business climate index, highlighted the weakness of Germany’s economy relative to European peers, declining for the second month in a row in August, underscoring lingering concerns about the spread of the delta variant.

“Germany’s leading indicator joins the choir of recently released leading indicators pointing to a loss of momentum in the German economy,” said Carsten Brzeski, an analyst at ING Bank.

In COVID news, Johnson & Johnson JNJ, -0.51% shared interim clinical data that indicates Americans who have received its single dose COVID-19 vaccine should get a second dose. The company said that two studies examining people who had received its shot found that a second dose boosted antibody levels. The studies haven’t yet been published in a medical journal.

Which companies are in focus?
  • Express Inc. EXPR shares jumped in Wednesday premarket trading after the apparel retailer reported a surprise profit. Shares were down 5%.
  • Dick’s Sporting Goods Inc. DKS shares soared more than 15% in Wednesday after the athletic retailer reported record second-quarter profit and sales. 
  • Shoe Carnival Inc. SCVL shares were off 3.3% in Wednesday trade after the retailer reported second-quarter earnings and sales that beat consensus and gave an upbeat outlook.
  • Cassava Sciences Inc. SAVA responded Wednesday to allegations posted overnight regarding the “accuracy and integrity” of trial data for its treatment of Alzheimer’s disease, saying it believed the claims are “false and misleading.” Its stock was down more than 30%.
  • ICON Technologies Inc., which uses jumbo-sized 3-D printers to build homes, said Wednesday it closed a $ 207 million series B round of investment led by Norwest Venture Partners, which is backed by Wells Fargo & Co. WFC. 
  • “Meme” stocks are back in the spotlight, with GameStop Corp. GME off 2.6% on Wednesday and AMC Entertainment Holdings AMC stock up 4.2%.
How other markets are faring
  • The benchmark 10-year Treasury note TMUBMUSD10Y, 1.323% was trading at 1.33%, compared with 1.289% on Tuesday.
  • In Asia, Tokyo’s Nikkei 225 NIK, -0.03% closed 0.03% lower, while the Hong Kong Hang Seng Index HSI, -0.13% declined 0.13% and the Shanghai Composite SHCOMP, +0.74% rose 0.74%
  • In Europe, London’s FTSE 100 UKX, +0.34% closed 0.3% higher as the pan-European Stoxx 600 SXXP, +0.01% ended virtually unchanged, up 0.01%. France’s CAC 40 PX1, +0.18% finished 0.2% higher and Frankfurt’s DAX DAX, -0.28% slipped 0.3%
  • Crude-oil prices were higher, with international benchmark Brent crude BRN00, +1.14% rising 0.7% higher at $ 71.71 a barrel and U.S. benchmark oil CL.1, +0.78%, West Texas Intermediate on the New York Mercantile Exchange, up 0.8% at $ 68.10 a barrel.