The S&P 500 closed Thursday above 4,200 for the first time despite a tepid response to great financial results at Apple, notes Jon Markman of Pivotal Point.
Bullish investors should be celebrating. The benchmark closed very near the best levels of the day and sectors other big than tech are finally participating.
In theory, stocks should surge higher as bearish investors are forced to cover short positions. However, I am growing wary. Maybe it’s the muted reaction to Apple’s results but something is not quite right. I would not be surprised by a consolidation toward support at 4,120.
The S&P 500 set a new intraday record at 4,218.78 but eased back later in the session to end 0.7% higher at 4,211.47. The Dow Jones Industrial Average rose 0.7% and the tech-heavy Nasdaq climbed 0.2%. Communication services led the sectors higher, with healthcare the only decliner.
Breadth slightly favored advancers over decliners and there were 1,134 new highs vs 56 new lows. Topping the new high list were Facebook (FB), Berkshire Hathaway (BRK.A), Bank of America (BAC), Wells Fargo (WFC), Charles Schwab (SCHW), Capital One (COF), and US Bancorp (USB). Here come the financials!
The US 10-year yield rose by 1.63% and West Texas Intermediate futures climbed 1.7% to $64.95 per barrel.
Government data showed a larger-than-expected gain in first quarter GDP and a further decline in initial jobless claims, both indicating that the economy continues to advance.
The US economy grew by an annualized 6.4% in Q1, following a 4.3% sequential expansion in Q4, and beat expectations for 6.1% growth.
Released at the same time, the level of initial jobless claims fell by 13,000 to 553,000 in the week ended April 24, pulling down the four-week moving average by 44,000, a third straight decline. Initial filings are the lowest since the weeks leading up to the pandemic.
The National Association of Realtors' monthly pending home sales index rose by 1.9% in March, below expectations, but the index was still up 23% from a year earlier. The NAR said demand for new homes should continue to rise in the coming months, while the current tight supply conditions should see some relief from increased construction.
Late on Wednesday, President Biden laid out plans for a $2.3 trillion American Jobs Plan as well as an American Families Plan with an outlay of $1.8 trillion, which together with the $1.9 trillion American Rescue Plan added up to an unprecedented level of fiscal support for the US economy.
Meanwhile, Apple (AAPL) expanded its share buyback program and raised its dividend after earnings more than doubled in its fiscal second quarter. Shares traded more than 3% higher after the results late Wednesday but later gave up its gains to close fractionally lower on Thursday.
Facebook (FB) has revenue drivers to tap into the near- and longer-term including in its Marketplace selling platform and Watch video content, Morgan Stanley said in a note after the social-media giant reported better-than-expected Q1 results. Shares rose by 7.3%.
Ford Motor (F) was the third-worst performer on S&P 500, down 9.4%, after it said it expects to lose about 50% of planned Q2 production "largely because of the additional effect of the supplier fire." It anticipates the flow of semiconductors from the Japanese supplier to resume by the end of Q2.
Learn more about Jon Markman at Pivotal Point.