S&P 500, Dow scale new heights following J.P. Morgan results
U.S. stocks have extended their run into the record books on Thursday, finding support after stronger-than-expected results from large financial institutions as well as upbeat economic data.
Higher oil prices after a sharp drop on Wednesday boosted shares of energy companies. Meanwhile, investors shrugged off a surprise decision by the Bank of England to leave monetary policy unchanged.
The U.K. central bank left key rates unchanged at 0.5%, but said most members see looser policy coming at the August meeting. Some had expected the central bank would ease on the heels of the U.K.’s Brexit referendum in late June, which sparked a rout in financial markets as well as fear of a recession in the U.K. and the eurozone.
“The fact that the Bank of England decided to hold off the rate cuts suggests the Brexit is unwinding in an orderly manner,” said Karyn Cavanaugh, senior market strategist at Voya Financial.
The S&P 500 rose 8 points, or 0.4%, to 2,160, with financials and materials sectors leading the gains. The benchmark index set an intraday high at 2,169.13.
Analysts pointed out that U.S. stocks are benefiting from increased demand from investors searching for yield in an environment where about a third of government bonds are at zero or negative rates.
“The U.S. stocks [are] the most desirable asset right now, especially if you think of potential earnings growth,” Cavanaugh said.
The Dow Jones Industrial Average advanced 112 points, or 0.6%, to 18,485, after touching an intraday high of 18,537.57. The Nasdaq Composite Index rose 23 points, or 0.5%, to 5,029.
“I think today’s decision by the BOE was to send a message to the markets that it’s business as usual, but a rate cut is coming and the Fed will continue to stay on the sidelines,” said Peter Cardillo, chief market economist with First Standard Financial, in emailed comments. “This is a positive for stocks as the ‘there is no alternative play’ continues,” he said.
Some economists had argued that the BOE should take a wait-and-see approach until it becomes clear what the new government’s strategy is. Former U.K. Home Secretary Theresa May took over as prime minister on Wednesday evening and immediately reshuffled the cabinet. She named Philip Hammond as the new Treasury chief and Boris Johnson as foreign secretary.
European stocks pared gains and the pound rose after the decision. Sterling bought $1.3307, up from $1.3146 late Wednesday in New York.
Economic news: Weekly jobless claims were unchanged, suggesting no significant rise in layoffs, while the producer prices index jumped last month, also pointing to a healthier level of inflation and growth.
It is a busier lineup for Federal Reserve speakers.
Atlanta Fed President Dennis Lockhart said in a speech he wasn’t worried about an outbreak of inflation from the current stance of policy.
“For that reason, I’m comfortable with a cautious and patient approach to policy in the near term,” he said, speaking at the Global Interdependence Center’s Rocky Mountain Economic Summit in Victor, Idaho. Lockhart isn’t a voting member of the Fed policy committee.
St. Louis Fed President James Bullard gave welcome remarks at the Official Monetary and Financial Institutions Forum at 10 a.m. Eastern, and at 6:20 p.m. he will answer questions from reporters
Dallas Fed President Rob Kaplan will appear at the same forum at 7 p.m. Eastern.
Earnings: Earnings season continues at full speed on Thursday. Shares of J.P. Morgan Chase & Co. rose 1.7% as it kicked off earnings for the nation’s biggest banks with stronger-than-expected quarterly earnings.
Shares of other large banks also rose. Bank of America Corp rose 1.5%, while Goldman Sachs Group Inc rallied 2.6%. Morgan Stanley gained 3% while Citigroup Inc. advanced 2.1%.
BlackRock Inc. shares declined 0.4% after profit and sales fell as expected.
Delta Air Lines Inc. shares rose 2.7% after the airline posted a profit beat, even as revenue fell short of estimates.
Yum Brands Inc. late Wednesday raised its forecast for core operating profit growth, sending shares of Taco Bell’s parent company up 2.9%.
Movers and shakers: The European Union’s antitrust regulator is slated to file additional formal charges against Alphabet Inc.’s Google on Thursday, according to several people familiar with the matter. Shares of the tech giant rose 0.5%.
Other markets: Asian markets closed mostly higher although China’s Shanghai Composite Index ended slightly lower.
Oil prices rose 1.7%, rebounding from sharp losses on Wednesday when a government report revealed that U.S. output edged higher in the latest week.
Gold slumped 0.9% to settle at $1,332.20 an ounce, and the dollar dropped against most major currencies. The 10-year Treasury yield ose to 1.537%.
Source: MarketWatch
