- The S&P 500, Dow and Russell 2K all closed at record highs on Thursday, while the Nasdaq 100 surged 2.4%.
- Stocks benefitted from fiscal stimulus optimism, strong US labour market data and good vaccine news.
It was a memorable day for US equity markets; the S&P 500 and Dow Jones managed intra-day and closing record highs, the former at one point hitting 3960 and then closing at 3938 and the former closing just under the 32,500 level. The Russell 2000 also managed a record closing high.
But it was the Nasdaq 100 that was the best performing of the major indices on Thursday, surging 2.4% to reclaim the 13,000 level despite a rise in long-term US government bond yields (something that has weighed on Big Tech and “growth” stocks recently) that saw 30-year US government bond yields rising 4.4bps to above 2.28%.
In terms of the sectors, a recovery in Big Tech names (Apple +1.7%, Microsoft +2.0%, Google +3.2%, Facebook +3.4%, Amazon +1.8%) pushed the S&P 500 information technology and communication services sectors to the top of the GICS Sector performance table, up 2.1% and 1.8% respectively. The S&P 500 consumer discretionary sector was up 1.6% amid a 4.7% recovery in its largest constituent Tesla. The more defensive sectors such as consumer staples (-0.2%), utilities (-0.3%) and financials (-0.3%) underperformed amid the more risk on bias to equity markets.
Risk-on
A number of positive developments have been driving risk appetite on Thursday. Firstly, US President Joe Biden signed his $1.9T “rescue” fiscal stimulus package into law on Thursday (as expected) and there is talk of stimulus cheques arriving in the hands of recipients as soon as the weekend; note that much is being made of the fact that stimulus cheques are likely to drive an increased flow of retail investor money into equity markets – it will be worth watching any news of increased retail investor deposit making/interest in retail-focused apps like Robinhood over the weekend.
Meanwhile, anticipation for US President Joe Biden’s next infrastructure-focused stimulus package is growing amid increased chatter regarding its potential price tag and provisions; the latest reports suggest it could have a price tag of up to $2.5T over the next four years and contain measures related to improving US competitiveness versus China, whilst separate reports suggest a starting point for negotiations on the stimulus package could be for a $1.5T bill. Biden is going to be giving more details his hopes/plans for the recovery package on Friday after he signs the rescue package into law.
Note that updated IMF forecasts for the US economy expect Biden’s just Congressionally approved $1.9T stimulus package to increase US GDP by 5-6% over the next three years. Another multi-trillion package would only further turbocharge the economic recovery, hence the optimism being seen in equity markets.
Elsewhere, and further contributing to the market’s relatively risk on tone on Thursday; US weekly jobless claims numbers came in better than expected; for the weekend ending on 6 March, 712K American signed up for unemployment benefit, slightly below expectations for 725K sign-ups. Meanwhile, the number of Americans who continued to claim unemployment benefits in the week ending on 27 February was a little lower than expected at 4.144M versus consensus expectations for something closer to 4.22M. This comes on the heels of last week’s strong February NFP report and obviously, a stronger labour market recovery in the US bodes well for the economic recovery and recovery in company earnings.
Elsewhere, and perhaps playing second fiddle to the above-mentioned themes but worth noting, the vaccine news has for the most part been positive; Pfizer and BioNTech presented real-world data for their vaccine which showed it to be 94% effective in preventing asymptomatic cases of Covid-19 and at least 97% effective in preventing symptomatic cases of the virus, based on data collected from participants who took the virus two weeks apart. Novavax also recently presented data confirming a high level of efficacy of its vaccine against both the UK and South African strains of Covid-19.
Meanwhile, reports out of Europe linking the AstraZeneca vaccine (which, for reference, has also been shown to be highly effective in preventing Covid-19 infection from real-world data collected in the UK) to blood clots; a number of European nations panicked and halted their rollouts of its vaccine, although health officials of other nations have swiftly debunked the link between blood clots and the vaccine as fake news. This news had no impact on US equities.
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