Blowout corporate earnings and a slew of stronger-than-anticipated economic data lifted the Dow Jones Industrial Average and S&P 500 to new highs Thursday—signaling that the long-awaited economic recovery could be picking up momentum.
The Dow climbed 305 points, or 0.9% Thursday, closing above 34,000 points for the first time ever after reaching the milestone in late-morning trading, while the S&P 500, which last peaked Tuesday, also scored a new record, jumping 1.1%.
Even the recently underperforming Nasdaq jumped 1.3%, though it’s still about 0.4% off its February high due to rising interest rates this year that have pivoted investors away from high-priced stocks like Tesla, Peloton and Zoom and toward industries like energy and financials that were hit hard by the pandemic.
Though they ended the day down 0.5%, Citigroup shares headed up the S&P’s morning gains after the New York City-based bank posted better-than-expected revenue and earnings of $19.3 billion and $7.9 billion, respectively, thanks largely to soaring investment bank revenues, which also helped Goldman Sachs pull off “monster” earnings Wednesday.
A slew of other companies surpassed Wall Street estimates with their Thursday morning earnings releases, including private equity giant BlackRock (up 2.1%), insurer UnitedHealth Group (up 3.9%), Bank of America (down 3%), PepsiCo (up 0.1%) and Delta Air Lines (down 2.8%),
Meanwhile, U.S. retail sales totaled $619.1 billion in March, according to the U.S. Census Bureau, soaring nearly 10% month over month driven by a variety of factors including stimulus checks, an accelerating Covid-19 vaccine rollout and warmer weather, says Vanessa Martinez, a partner at $1.6 billion wealth advisory The Lerner Group.
The labor market is also showing signs of a better-than-expected recovery, with unemployment claims falling to 576,000 last week, nearly 200,000 less than the previous week and marking their lowest level in more than a year, according to the Labor Department on Thursday.
“Although 34,000 by itself is just another number, this is a monumental feat when you think back to where we were last year at this time,” Ryan Detrick, Chief Market Strategist for LPL Financial, said in an email Thursday. “The speed and resiliency of this economic recovery is unlike anything we’ve ever seen and it helps to justify stocks at all-time highs.”
Though nearly 17 million Americans are still receiving some form of unemployment assistance, the upbeat employment report Thursday could signal that the long-struggling labor market might finally be turning around. “With a huge, better-than-expected decline in new claims for unemployment assistance, at long last the economic recovery appears to be picking up speed,” Mark Hamrick, a senior economic analyst at Bankrate, said in a Thursday email. The retail sales data, meanwhile, shows that there’s “plenty of pent-up demand in the economy,” Martinez said, with consumer savings rates surging over the past year likely to elevate spending for the rest of this year.
What To Watch For
With big bank earnings largely out of the way, big-tech companies are next on deck to report earnings. Apple, Facebook and Tesla are among firms due out later this month.
Trillions of dollars in fiscal stimulus, accommodative monetary policy and blowout corporate earnings have fueled huge gains for the stock market during the pandemic, and this week’s earnings reports are a sign the latter point could continue as the economy reopens. Meanwhile, Congress is working on another relief package that could inject another $2 trillion into the economy, and the Federal Reserve insists it won’t ease up on its economic support until full-employment and price stability are both met—something still not on the horizon given unemployment of 6%.