U.S. stocks more than recovered last week’s losses, with the Standard & Poor’s 500 Index reaching a record high and the Nasdaq Composite Index closing above 15,000 for the first time Tuesday. The Dow Jones Industrial Average closed just shy of its all-time high.
- Stocks recovered all of last week’s losses to resume their 17-month climb, with the S&P 500 and Nasdaq closing at record highs Tuesday.
- After a spate of recent worrying headlines suggesting the spread of the delta variant of the coronavirus would crimp the economy, fears eased after the FDA on Monday approved a vaccine.
- The FDA’s approval prompted more vaccine mandates and buoyed hopes the virus would remain under control and the economy would continue recovering.
Since their lows on March 23, 2020, at the pandemic’s onset, stocks had rallied strongly in fits and starts, with the S&P 500 and the Nasdaq more than doubling in value, despite the resurgence of various waves of coronavirus over the last 18 months. The Dow hit its record high of 35,631.19 on Aug. 16.
The bounceback comes on the heels of a spate of negative economic news that had pressured prices during the last two weeks. The bad news included data from the Centers for Disease Control and Prevention showing a surge in COVID-19’s delta variant in August, to levels not seen since late January; a “stunning loss” of consumer confidence in the much-heralded University of Michigan consumer sentiment survey in the first part of August, as people worried about the variant’s economic impact; a larger-than-expected 1.1% decline in July retail sales; and a reduction by Goldman Sachs of its third-quarter growth outlook from 9% to 5.5%, due to a larger-than-expected economic impact from the variant.
Last week, on an intraday basis, the S&P 500 touched its lowest level since July 22, the Dow was at its weakest since July 22, and the Nasdaq fell to its lowest point since July 20.
What’s changed since then is that, on Monday, the Food and Drug Administration officially approved Pfizer-BioNTech’s COVID-19 vaccine, clearing the way for companies and government agencies that may have been hesitant to mandate a non-FDA approved vaccine to require one now. President Joe Biden called on leaders to impose vaccine mandates on Monday as well. Following the FDA announcement, CVS and Chevron said they would enforce vaccine requirements for certain employees, for example. New York City Mayor Bill de Blasio said all public schools staff and teachers in the city would need to get vaccinated, and Disney’s theme park workers union agreed to a vaccine mandate.
“There is optimism we can get on the other side of the delta variant,” said Edward Moya, senior market analyst of the Americas at brokerage firm OANDA.
Focusing on Positives
With vaccination rates now expected to rise with increasing mandates, economists said the market can refocus on market positives, including strong corporate earnings growth and still-hefty personal savings built up over the last 18 months, buoyed by several rounds of government stimulus.
As of Aug. 20, figures from financial market data firm Refinitiv show that of the 476 companies in the S&P 500 that have reported second-quarter earnings, 87.4% have reported earnings above analyst estimates, topping the long-term average of 65.6% since 1994, and the prior four-quarter average of 83.4%. And, if the Federal Reserve holds to its promise to keep short-term interest rates near zero to continue supporting the economy until broad-based, maximum employment gains are reached, analysts said corporate earnings are likely to continue increasing as companies take advantage of the low rates to invest in their businesses.
During the pandemic, consumers had also accumulated nearly $2 trillion in excess savings, much of which is still waiting to be spent, according to the Federal Reserve. Economists expect that to continue fueling the economy as well.
The S&P 500 ended 6.70 points higher at 4,486.23, Nasdaq up 77.15 points at 15,019.80, and the Dow up 30.55 points at 35,366.26.
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