S&P And Dow Score New Record Highs, For The Week: Health Care, Materials And Utilities Sectors Lead Gains

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Topline

Strong corporate earnings from some major companies, including JPMorgan and Goldman Sachs, and a flurry of robust economic data pushed the S&P 500 and Dow to new record highs this week, on hopes that an economic recovery can be sustained amid a dovish Fed policy and continuing vaccinations of the public.

Key Facts

The Dow, which closed above 34,000 points for the first time in history on Thursday, gained 0.48% on Friday, while the S&P 500 rose 0.36% and the Nasdaq edged up 0.1%.

For the week, the S&P 500 has gained 1.4%, The Dow has climbed 1.2%, while the Nasdaq is up 1.1% (although Nasdaq remains slightly below its Feb. 12 record close of 14,095.47).

For the week, the best performing S&P sectors were the value-oriented health care, materials and utilities industries (each gained at least 2.7%), while the communications services, consumer staples and energy sectors were the worst performers, but still posted modest gains.

Year-to-date, the Dow, S&P 500 and Nasdaq are up 11.7%, 11.4% and 9%, respectively.

Morgan Stanley reported stronger-than-expected first quarter earnings on Friday, pumped by robust performance at its trading desk, following a slew of blowout results from other of Wall Street’s biggest banks and investment banks this week, including Goldman Sachs, which posted record earnings on Wednesday.

The University of Michigan said on Friday its preliminary consumer sentiment index rose to 86.5, a one-year high, and up from 84.9 in March, adding to other strong economic data earlier in the week.

Key Background 

The week witnessed the release of blockbuster earnings from megabanks Citigroup, JP Morgan, Bank of America and Wells Fargo — as well as from Goldman Sachs and Morgan Stanley, driven by soaring dealmaking and trading. Investors were also buoyed by other strong economic data this week, including a report on Thursday that U.S. retail sales jumped by 9.8% in March from February as consumers, many of them vaccinated and flush with cash from stimulus checks, were eager to spend. In addition, the jobs picture brightened as the Labor Department said on Thursday that initial unemployment claims fell to 576,000 last week, the lowest level in more than a year, suggesting labor markets may have turned a corner.

Crucial Quote 

“Banks took a lot of loan loss reserves last year around this time. Loan quality has actually been better than they expected, so some of those loan loss reserves are going to get reversed and flow back into the income statement,” Randy Watts, chief investment officer at O’Neil Global Advisors, wrote in a note.

Tangent

Federal Reserve Governor Christopher Waller added to the upbeat mood on Wall Street by telling CNBC the economy is “ready to rip” and there’s no reason for the central bank to tighten policy now. Also, Tom Mantione, managing director, UBS Private Wealth Management, in Stamford, Conn., wrote in a note earlier this week: “Even with stocks at record highs, we expect further upside thanks to supportive fiscal and monetary policy, improving economic data and faster Covid-19 vaccination rates.”

What To Watch For

With earnings from the big banks providing a huge lift this week, investors will now await results later in the month from tech giants Apple, Facebook and Google parent Alphabet, as well as from automaker Tesla.

Further Reading

Dow Closes Above 34,000 For First Time Ever After Blowout Big Bank Earnings And Economic Data (Forbes)

Fed Chair Powell Warns That Cyber Attacks And Covid-19 Spreading Again Are The Biggest Risks To The Economy (Forbes)

The Stock Market Is Preparing For the Greatest Flood Of Money In History (Forbes)