S&P 500 edges to another record high as stocks kick off 3rd quarter with small gains

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U.S. stocks moved slightly higher Thursday, with the S&P 500 extending its drive into record territory, finding modest support after a larger-than-expected drop in first-time applications for jobless benefits a day ahead of the June employment report.

How are equity benchmarks trading?

  • The Dow Jones Industrial Average was up 5.55 points at 34,508.06.
  • The S&P 500 was up 7.73 points, or 0.2%, at 4,305.23.
  • The Nasdaq Composite edged up 12.20 points, or 0.1%, to 14,516.15.

On Wednesday, the S&P 500 rose 5.70 points, or 0.1%, to end at 4,297.50 and mark its 34th record close of 2021, surpassing its total number of record closes in 2020; the Dow closed 210.22 points higher at 34,502.51, a gain 0.6%, bringing the blue-chip benchmark within 1% of its May 7 record close at 34,777.76. The Nasdaq Composite Index shed 24.38 points, or 0.2%, finishing at 14,503.95, marking its first decline in three sessions.

What’s driving the market?

Investors are kicking off July and the start of the third quarter in a tentative fashion. The economy is recovering from the COVID pandemic but there are still questions about the health of the jobs market and inflation that could derail the bullish sentiment supporting all three main stock indexes at or near records after their best first-half performances since 2019.

First-time jobless claims fell to 364,000 last week from 411,000 the previous week, the Labor Department said. Economists had forecast a decline to 380,000. The data comes ahead of the Labor Department’s monthly payrolls figures on Friday and a better-than-expected update on private-sector employment from ADP on Wednesday.

“This morning’s beat on jobless claims is a real bright spot. Not only did we print the lowest number since the pandemic began, but it also reverses the trend on misses that we’ve seen the past few weeks,” said Cliff Hodge, chief investment officer for Cornerstone Wealth.

“Staying below that big-round-number [400,000] level could bolster confidence in risk taking during the dog days of summer,” he said. 

Meanwhile, the IHS Markit final reading of its US. June manufacturing PMI was 62.1 compared to a flash estimate of 62.6, but unchanged from the May final reading. The manufacturing upturn has been supported by further marked expansions in output and new orders, but supply chain disruptions worsened and weighed on production capacity, said Chris Williamson, Chief Business Economist at IHS Markit. Input costs meanwhile showed the largest jump on record, feeding through to another record rise in factory selling prices.

The Institute for Supply Management’s manufacturing sector survey is due at 10.00 a.m. ET. A report on construction spending is also due at 10 a.m.

Among Fed speakers, Atlanta Federal Reserve President Raphael Bostic is slated to speak at 2 p.m.

On Wednesday, Dallas Fed President Rob Kaplan again said the Fed should start to slow down, or taper, its asset purchases before the end of the year, in an interview with Bloomberg TV.

Investors may also be watching news abroad, as President Xi Jinping on Thursday celebrated the 100th anniversary of the Chinese Communist Party with a defiant speech warning foreign powers not to “bully” China unless they want “their heads bashed.”

Oil futures were jumping ahead of a meeting of the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, that was expected to see an agreement to lift output by around 500,000 barrels a day beginning in August — a rise expected to be easily absorbed by the market as the global economy gains momentum.

See: Oil could top $100 as commodities boom shifts away from China, says top economist

In public health news, the World Health Organization said a 10-week decline in new cases in Europe has come to an end, with cases up 10% last week. WHO regional director for Europe Hans Kluge said the rise is due to relaxed restrictions and increased travel, the Guardian reported, and said a new wave will emerge if discipline isn’t maintained. 

Which companies are in focus?

  • McCormick & Co. shares MKC fell 0.6%, after the maker of spices and flavorings beat estimates for its fiscal second-quarter and raised guidance.
  • MKS Instruments Inc. MKSI said Thursday it has reached an agreement to acquire Atotech LtdATC, in a cash-and-stock deal with an equity value of $5.1 billion and an enterprise value of about $6.5 billion. MKS shares fell 5.8%, while Atotech stock was down 2.7%.
  • Elliott Management has called on British pharmaceutical giant GlaxoSmithKline to name new directors to its board and begin a process that will determine the future of its embattled CEO, Emma Walmsley.
  • Krispy Kreme Inc. priced its initial public offering at $17 a share late Wednesday, significantly below their expected range of $21 to $24 a share. Shares are expected to begin trading Thursday on the Nasdaq under the ticker symbol “DNUT” DNUT.
  • Shares of Chinese electric car company NIO Inc.  rose 1.8%, after the company said it delivered 8,083 vehicles in June, up 116.1% from the same time a year ago.

What are other markets doing?

  • The yield on the 10-year Treasury note rose 1 basis point to 1.459%. Yields and debt prices move in opposite directions.
  • The ICE U.S. Dollar Index a measure of the currency against at basket of six major rivals, was off 0.1%.
  • The U.S. oil benchmark was up 3.4% at $75.96 a barrel, while gold futures edged up 0.6% to $1,782.20 an ounce.
  • In European equities, the Stoxx 600 Europe rose 0.5% and London’s FTSE 100 advanced 0.9%.
  • In Asia, the Shanghai Composite fell 0.1%, while Japan’s Nikkei 225 was off 0.3%.
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