New York • The stock market roared back to record highs on Thursday, driven by better news on the economy.
The Standard & Poor’s 500, the Dow Jones industrial average and the Russell 2000 index set all-time highs. The S&P broke through 1,700 points for the first time. The Nasdaq hit its highest level since September 2000.
Milestones for the Standard & Poor’s 500 index
The Standard & Poor’s 500 index broke through 1,700 points Thursday for the first time.
It’s only been three months since the S&P 500 first closed above 1,600. The previous 100-point gain took much longer to achieve. The index first closed above 1,500 more than a decade ago, toward the end of the dot-com bubble in March 2000. The S&P then slumped twice before starting on its current bull run in March, 2009.
Here’s a look at the previous times that the S&P 500 index, a broad measure of large-company stocks, first closed above round-number levels, measured in increments of 100 points.
1,600 » May 3, 2013
1,500 » March 22, 2000
1,400 » July 9, 1999
1,300 » March 15, 1999
1,200 » December 21, 1998
1,100 » March 24, 1998
1,000 » February 2, 1998
900 » July 2, 1997
800 » February 12, 1997
700 » October 4, 1996
600 » November 17, 1995
500 » March 24, 1995
400 » December 26, 1991
300 » March 23, 1987
200 » November 21, 1985
100 » June 4, 1968
Source: S&P Dow Jones Indices
The gains were driven by a steady flow of encouraging, if incremental, reports on the global economy.
Overnight, a positive read on China’s manufacturing helped shore up Asian markets. Then, an hour before U.S. trading started, the government reported that unemployment claims fell last week. At mid-morning a trade group said U.S. factories revved up production last month. And while corporate earnings news brought both winners and losers, investors were able to find enough that they liked in companies including CBS, MetLife and Yelp.
"It’s just a lot of things adding up," said Russell Croft, portfolio manager of the Croft Value Fund in Baltimore. "It’s hard to put your finger on why exactly, but basically it’s a bunch of pretty good data points coming together to make a very good day."
Overall, analysts said, the news was good but not overwhelmingly so. Enough to suggest that the economy is improving, but not enough to prompt the Federal Reserve to withdraw its economic stimulus programs.
Earnings results covered a wide range. Boston Beer, which makes Samuel Adams, and home shopping network operator HSN rose after beating analysts’ estimates for earnings and revenue. Kellogg, health insurer Cigna and cosmetics maker Avon were down after beating earnings predictions but missing on revenue.
It’s becoming a familiar template this year. Stock indexes have been setting record highs even while the underlying economy is more often described as decent, but hardly going gangbusters.
Take company earnings, the most important thing for stock investors. Earnings at S&P 500 companies are up 4.3 percent this quarter, and revenue is down 0.4 percent, according to S&P Capital IQ. In previous eras, that hardly would have been considered encouraging. In the second quarter of 2007, before the financial crisis imploded, earnings rose 8.7 percent and revenue was up 5.8 percent. But compared with the second quarters of 2008 and 2009, when earnings plunged more than 20 percent each time, this year’s results look positively cheery.
Other economic indicators have been following a similar fashion of not too good, not too bad. While layoffs are steadily declining, companies aren’t hiring as quickly as they did before the crisis. The economy is growing, but not fast enough to drive significant job growth. The Commerce Department reported this week that the U.S. grew at a tepid annual rate of 1.7 percent in the second quarter.
"They’re not great numbers, but they’re positive and they’re continuing to grow," said Tim Courtney, chief investment officer of Exencial Wealth Advisors in Oklahoma City. "That’s about all the market needs to hear."
The S&P 500 index rose 21.14 points, or 1.3 percent, to 1,706.87. The Dow rose 128.48 points, or 0.8 percent, to 15,628.02. The Russell 2000 of small-company stocks rose 14.62 points, or 1.4 percent, to 1,059.88.
The Nasdaq composite index rose 49.37 points, or 1.4 percent, to 3,675.74, in line with the daily gains of other indexes but not near its record. The Nasdaq, which is heavily weighted with technology stocks, briefly veered above 5,000 points in March 2000, just before the Internet bubble burst.
Investors said Thursday that the S&P’s crossing over 1,700 points might give consumers a psychological boost, but they were hardly crowing about a new era in stocks. Turns out it’s quite common for indexes to hit records. Since 1950, the S&P has hit a new high about 7 percent of the time, or an average of about every 15 days, Courtney said. The S&P’s last record close was not so long ago, on July 22.
"You’ve got a disconnect here between the real economy and ... the stock markets," said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Mass. McMillan noted that while many companies were beating earnings expectations, they’ve also been trimming staff and lowering their own estimates.
The S&P made the jump from 1,600 to 1,700 in less than three months. The index first traded above 1,600 on May 3. The previous 100-point gain took much longer to achieve: The S&P first closed above 1,500 in March 2000.
The market’s sharp advance Thursday was a stark contrast with the previous two days, when the S&P 500 moved less than a point each day. On Tuesday, investors didn’t want to make big moves ahead of the Federal Reserve’s policy announcement the next day. On Wednesday, the Fed didn’t make much news after all. The central bank said, unsurprisingly, that the U.S. economy was recovering but still needed help. The Fed didn’t give any indication of when it might cut back on its bond-buying program, which has been supporting financial markets and keeping borrowing costs ultra-low.
Among the economic and corporate news that investors digested Thursday:
— China’s purchasing managers’ index — a gauge of business sentiment — rose to 50.3 in July from 50.1 in June. Analysts had expected a modest decline below 50.
— The Labor Department said that the number of Americans applying for unemployment benefits fell 19,000 to 326,000. That was the fewest since January 2008.
— The Institute for Supply Management, a trade group of purchasing managers, said its index of manufacturing jumped to 55.4 in July, up from 50.9 in June. A reading above 50 indicates growth.Next Page >
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