Stock indexes blasted to record highs on Thursday as US lawmakers reportedly neared an agreement on a $900-billion pandemic-relief package at a time when more Americans filed for unemployment benefits as a result of widespread efforts by beleaguered companies to reduce head count, states Jon Markman of Pivotal Point.
The Dow rose 148 points, or 0.5%, to close at a new record. The S&P 500 climbed almost 0.6%, the Nasdaq 100 rose 0.7%, and the Smallcap 600 rose 1%.
Breadth favored advancers 5-2, with an impressive 1075 new highs and 54 new lows. Topping the new highs lists were Accenture (ACN), PayPal (PYPL), Square (SQ), Estee Lauder (EL), Shopify (SHOP), Twilio (TWLO), Crowdstrike (CRWD), Match (MTCH), and Carvana (CVNA). A new age of leaders is emerging to be sure.
Senate Majority Leader Mitch McConnell said a stimulus bill was "close at hand" from the Senate floor. Lawmakers are also up against a Saturday deadline to approve funding for the federal government to avoid a shutdown. It’s a measure of our hapless politicians that they leave this to the last minute every time; it’s wasteful and pointless.
The Labor Department reported ahead of the opening bell that initial claims for unemployment insurance rose to 885,000, its highest reading since early September. The data came as the US has seen surging confirmed cases of the respiratory disease in recent weeks, with 247,400 new infections on Wednesday, according to data from Johns Hopkins University.
"The surging number of COVID cases across the country and the reimposition of social distancing policies are making life difficult for service-providing businesses," said Jefferies economists Thomas Simons and Aneta Markowska. "The state-level claims data from the prior week, which provides detail about what industries led the way for the week, are littered with comments about layoffs in food and accommodative services, as well as other service-related industries."
According to reports, the proposed stimulus package includes direct payments of $600 to individuals as well as $300 in extra weekly unemployment payouts. The plan does not include aid to state and local governments and liability protections for businesses, issues which have slowed negotiations.
Materials rose almost 1.2%. Healthcare gained 1.1%, lifted by Amgen's (AMGN) 1.2% rise. Moderna (MRNA) advanced 5.1%. Energy led declining sectors, falling about 0.6% even as crude futures rose. Accenture (ACN) popped 6.9% after the business-services company raised its outlook for its current fiscal year after its first-quarter results topped views.
Bottom Line: Brokerage analysts are lifting their forecasts for the S&P 500 (SPX) in 2021 with a lot of enthusiasm; the average expected gain is around 10%. The expectation is usually around +8%, so hopes are fairly high. My own research has shown that the consensus view is rarely right, so next year is more likely to be either around +5% or less…or 15%-plus. I would bet on the latter as the pace of innovation in both digital transformation services and products is accelerating. My wager would be +20% for the Nasdaq 100, but only after a 10% correction in the first or second quarter.
Learn more about Jon Markman at Pivotal Point.
