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S&P 500 Closes At Record High As Investor Optimism Reaches Highest Level Since 2017

Topline

With recently resurgent technology stocks heading up the market’s gains, the S&P 500 nabbed a new closing high on Thursday as investor sentiment hit its most bullish level in more than three years, a sign Wall Street may be getting over its concerns that rising interest rates might tank the market.

Key Facts

The S&P 500 climbed 0.4% Thursday, closing at a new record high for the third day in a row.

Meanwhile, the Dow Jones Industrial Average, which tracks the prices of 30 market leaders including Walt Disney, Nike and Goldman Sachs, ticked up about 0.2%, ending the day less than 0.1% off a record high from Monday.

Technology stocks outperformed the broader market Thursday, with the tech-heavy Nasdaq climbing nearly 1% as PayPal, Intuit and Autodesk jumped about 3% apiece.

Big tech also rallied: Salesforce, Twitter and Apple all added between 2% and 3% as yields on the ten-year Treasury, which have spiked this year and spooked investors away from high-priced stocks, fell to their lowest levels in nearly two weeks.

The uptick comes as bullish investor sentiment hit 57% last week, according to the American Association of Individual Investors’ weekly survey, representing the most euphoric level since December 2017, when energy stocks led the market to new highs. 

Despite the rallying stock market, new unemployment claims rose more than economists feared last week, totaling 744,000 and climbing 2% from the prior week as layoffs continued, despite signs that the recovery is progressing in other areas of the economy.

Key Background

Trillions of dollars in fiscal stimulus, accommodative monetary policy and blowout corporate earnings have fueled huge gains for the stock market during the pandemic, and the Federal Reserve late Wednesday indicated it wouldn’t ease up on its unprecedented economic support even though the market is well on its way to a full recovery. Fed officials confirmed they won’t stop buying back more than $100 billion in distressed assets each month until the labor market reaches maximum employment and inflation stabilizes at more than 2%. Meanwhile, billionaire JPMorgan CEO Jamie Dimon cheered on the market’s rally Wednesday morning, saying the U.S. economy will “likely boom” into 2023 thanks to excess savings, heightened government spending and the Fed’s dovish policy.

Crucial Quote

“All the same forces that have been propelling stocks higher for months not only remain in place, but some are strengthening,” Vital Knowledge Media Founder Adam Crisafulli said in a Thursday note. “Reopening alone would be enough to power a healthy economy for the next several quarters, but an unprecedented wave of fiscal and monetary stimulus is turbocharging the recovery.”

Tangent

“The jump in jobless claims is disappointing but doesn’t change our view that the next few months will see huge job gains as the economy continues to reopen,” Jeff Buchbinder, an equity strategist at LPL Financial, said in an email Thursday, adding that he wouldn’t be shocked to see employment return to prepandemic levels by the end of this year, echoing expectations from Bank of America analysts, who predicted last week that the labor market should recover before year’s end if current trends continue.

Further Reading

Unemployment Claims Rose To 744,000 Last Week (Forbes)

Is The Stock Market About To Crash? (Forbes)

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