Stocks completed the fastest-ever return to a record after a drop of at least 20%, surpassing February highs for the first time since the coronavirus pandemic upended financial markets. The dollar fell to the lowest in more than two years, while Treasurys advanced.
The S&P 500 eked out a gain, capping a 52% rally from its March low. The gauge had failed to breach the Feb. 19 closing level in three of the past four sessions.
Massive stimulus injections and a surge in technology companies have driven the rebound in American stocks from a pandemic-induced selloff. Daily coronavirus case counts, positive test rates and hospitalizations look to be improving — as evidence grows that the peak of the flareup across Sunbelt states is in the past.
While stimulus talks have stalled, better-than-feared economic data and corporate earnings have instilled optimism that a recovery is taking shape.
“Momentum is currently positive as the actions of the Fed and other major central banks continue to drive yield-seeking investors into racier equities and away from bonds,” says Fawad Razaqzada, an analyst at ThinkMarkets. “While things could look a lot different in the not-too-distant future, the short-term picture certainly looks bullish right now.”
The fact that the benchmark is breaking through a record may be psychologically interesting, but these milestones should be taken in stride, according to Chris Larkin, managing director of trading and investment product at E-Trade Financial.
The 20 top-performers have generated gains well over 50% in the first seven months of the year.
“It may hold some short-term importance for traders who have built this into their strategy, but for the most part, anybody participating in the market should look past these relatively arbitrary moves and focus more on fundamentals,” Larkin says.
As the S&P 500 pushes higher, one indicator may boost the confidence of equity bulls. The benchmark’s cumulative advance-decline line is still near its peak. That signals broad participation is supporting the rally, as technical analysts often suggest breadth leads price, and any near-term pullback will be shallow and short. For more market commentary, see the MLIV blog. — With assistance from Andreea Papuc, Yakob Peterseil, Lynn Thomasson, Sophie Caronello, Claire Ballentine, Vildana Hajric, Katherine Greifeld and Andrew Cinko
