Dow and S&P 500 close at new highs as blowout earnings ease fears of Delta variant


Top line

Major stock indexes closed at 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 crisis. pandemic despite growing fears that an increase in Covid-19 cases will stifle economic recovery.


The S&P 500, which closed at a record high Thursday, rose 0.2% to 4,436 as retailers and financial giants such as Macy’s, Charles Schwab and Wells Fargo jumped 6.2%, 3, 8% and 3.8%, respectively.

The Dow Jones Industrial Average climbed 0.4% to 35,208 points, surpassing a July 26 closing record on the back of soaring prices for Goldman Sachs and JPMorgan stocks, which topped the index with gains of around 3% each.

Despite the strength of the broader market, the tech-rich Nasdaq fell 0.4% to 14,835, penalized by the sale of shares of major techs including Tesla, Amazon and Apple, which fell by 2 , 2%, 0.9% and 0.5%, 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 Friday note, highlighting gains in leisure, hospitality and food services jobs that boosted July’s best. – 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 have released second quarter results through Friday afternoon, and 87% of them have beaten 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”.


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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