Healthy U.S. economic data and corporate earnings encourage investors
U.S. stocks rallied again Thursday, with all three benchmark indexes closing at new records, following the signing of a trade truce between the U.S. and China on Wednesday and Senate approval of a new trade deal between the U.S., Mexico and Canada on Thursday.
Financial and technology shares led the rally, with Google’s parent Alphabet becoming only the fourth company to reach a $1 trillion market capitalization, as investors were encouraged by a batch of healthy U.S. economic data along with positive corporate earnings reports.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.92% gained 267.42 points, or 0.92%, to 29,297.64, with the blue-chip index extending its three-day run-up above the psychologically significant 29,000 on Wednesday.
The S&P 500 index SPX, +0.84% advanced 27.52 points, or 0.84%, to 3,316.81 and the Nasdaq Composite index COMP, +1.06% added 98.44 points, or 1.06%, to 9,357.13.
On Wednesday, the Dow rose 90.55 points, or 0.3%, at 29,030.22, the S&P 500 index gained 6.14 points, or 0.2%, to close at a record at 3,289.29, while the Nasdaq Composite Index gained 7.37 points, or 0.1%, to close at 9,258.70.
What’s driving the market?
Under the terms of the trade agreement signed by President Trump on Wednesday, China is expected to purchase $95 billion more in U.S. commodities than in 2017, and roughly $100 billion more in manufactured goods and services.
Investors were heartened by the full 96 page text of the agreement and by comments by U.S. Treasury Secretary Steve Mnuchin that further tariff reductions could come in stages, according to Tom Essaye, president of the Sevens Report. “Phase one is behind us and it met market expectations,” he wrote. “Now the very real question of whether phase one results in an uptick in economic growth lies in front of us, and the truth is it’s unclear.”
In other trade news Thursday, the U.S. Senate overwhelmingly approved the U.S.-Mexico-Canada Agreement, sending the pact to President Donald Trump for signature just a day after he inked a high-profile trade deal with China.
Outside of trade relations, market participants digested a fresh round of corporate earnings reports, with shares of Morgan Stanley MS, +6.61% rallying 6.61% Thursday, after the investment bank reported fourth-quarter earnings and sales that rose well above expectations, adding to what has been a mostly positive reporting season for the financial services industry.
“We expect earnings growth to drive stock market gains in 2020,” said LPL Financial Chief Investment Strategist John Lynch. “With valuations elevated, corporate America will probably have to do the heavy lifting to get stocks much above current levels.”
Which data are in focus?
In a good sign for the U.S. economy, most retailers posted higher sales in December to finish out the holiday season on a strong note. Retail sales increased 0.3% last month, the government said Thursday, just a tick below the MarketWatch forecast.
The number of Americans who applied for unemployment benefits in early January fell for the fifth week in a row, giving a clean bill of health to strong U.S. labor market as 2020 got underway.
The Philadelphia Fed said Thursday its gauge of business activity in its region surged in January. The regional Fed bank’s index rose to 17 in January from 2.4 in the prior month.
Home builder confidence fell one point to 75 in January from the month prior, though it remains near its highest reading since 1999, according to the National Association of Home Builders confidence index.
“Markets simply cannot keep getting economic data like this showing the labor market is the strongest in history and with consumers spending their hearts out and still believe that the economy could be anywhere near the edge of the recession cliff,” MUFG chief economist Chris Rupkey wrote in a note.
Which stocks are in focus?
Google’s GOOGL, +0.76% GOOG, +0.87% parent Alphabet became the fourth technology company to join the $1 trillion market capitalization club, rising 0.8% to $1,450.16 a share, adding about $8 billion in value on Thursday.
Southwest Airlines Co. LUV, +0.49% said that it removed the Boeing Co.’s BA, +0.67% 737 Max flights from its schedule through June 6. Shares of Southwest were up 0.49% Thursday, while Boeing shares gained 0.67% also
Shares of Signet Jewelers Ltd. SIG, +40.20% soared by 40.2% after the company provided upbeat sales guidance and reported better-than-expected holiday sales.
Shares of Bank of New York Mellon Corp. BK, -7.83% fell 7.83% Thursday, after the bank company beat earnings estimates but missed on revenue and issued a disappointing outlook.
How are other markets trading?
In bond markets, the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.84% rose 2.1 basis points to 1.809%.
Oil prices rose with the price of a barrel of West Texas Intermediate Crude for February delivery CLG20, +0.68% adding 71 cents, or 1.2%, to $58.52. In precious metals, the price of gold slipped lower, with an ounce of gold for February delivery GCG20, +0.34% falling $3.50, or 0.2% , to $1,550.50.
The U.S. dollar DXY, +0.22% declined 0.1%, relative to a basket of its peers.
In Europe, stocks edged higher, with the Stoxx Europe 600 SXXP, +1.01% closing 0.16% at 420.32, a new record close.
In Asia overnight, stocks traded mixed. The China CSI 300 000300, +0.14% fell 0.5%, Hong Kong’s Hang Seng index HSI, +0.60% gained 0.4% and Japan’s Nikkei NIK, +0.45% rose 0.1%.