Stocks traded higher Thursday, extending gains in another record-setting day on Wall Street.
The S&P 500 more than 1% during afternoon trading, breaking above 4,000 for the first time ever. The Nasdaq outperformed to rise 1.8% as technology stocks jumped. Shares of electric-vehicle stocks including Workhorse Group (WKHS) and Plug Power (PLUG) increased after President Joe Biden discussed the details of his more than $2 trillion infrastructure plan, which would include building out half a million EV charging stations.
Thursday's session marks the first of the second quarter and of April. Historically, the month has been fortuitous for equities. Stocks have closed April higher in 14 out of the past 15 years, and since 1950, it has been the second best month for stocks, according to an analysis by Ryan Detrick, LPL Financial chief market strategist.
Heading into the second quarter, stock leadership has tilted strongly in favor of cyclical and value stocks, which have earnings most closely tethered to the broad-based reopening of business across the U.S. economy. The energy, financials and industrials sectors have outperformed in the S&P 500 for the year-to-date, while last year's winners – like the information technology and communication services sectors – have lagged by comparison. Many analysts think this trend will continue into the coming months.
"I think we’re going to see more of the same in terms of market leadership. This is an environment in which the economy is likely to accelerate,” Kristina Hooper, Invesco chief global market strategist, told Yahoo Finance. “And I think that means that we’ll see continued outperformance of areas like energy, like financials, like consumer discretionary, material, industrials — those areas of the stock market that are most sensitive to the economy.”
Others made similar assertions.
"I think the really big news is that we’re at a really big tipping point right now. We’re out of the pandemic, or getting out of the pandemic. There’s a gargantuan change in how our economy’s going to be run with the stimulus plan as well as the Build Back Better plan,” Stephen Dover, Franklin Templeton chief market strategist, told Yahoo Finance, referring to President Joe Biden's recently unveiled, multi-trillion-dollar infrastructure proposal. “So I think investors are going to have to look very differently looking forward than they have been looking in the past.”
The hefty spending plan Biden proposed this week to revitalize roads, bridges, factories, broadband and address other concerns including climate change is also set to be a key focus for equity investors going forward, with the increased government spending poised to come alongside tax policy changes in order to fund it. Biden's plan includes lifting the corporate tax rate, with additional taxes on capital gains and individual top marginal rates likely to be unveiled later.
"The larger impact to markets will be whether or not the corporate tax rate is raised to 28% - or somewhere in between there and the current 21% level – and whether or not a global minimum tax on corporations can be established," Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in an email. "It’s likely that the stock market can withstand a hike in the corporate tax rate to 25%, but unclear how much room there is above that if stocks are going to keep moving higher between now and year end."
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4:01 p.m. ET: Stocks close at record highs, tech stocks lead
Here's where the three major indexes ended Thursday's session:
S&P 500 (^GSPC): +46.92 points (+1.18%) to 4,019.81
Nasdaq (^IXIC): +233.23 points (+1.76%) to 13,480.11
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2:24 p.m. ET: Strategists are striking an upbeat tone on Q1 earnings, with estimates rising by the most on record
As pandemic-related headwinds begin to dissipate, analysts are strongly increasing their outlooks for S&P 500 earnings for the first quarter.
Throughout the first three months of 2021, analysts increased their bottom-up earnings per share estimates for S&P 500 companies by a record 6.0%, according to data from FactSet's John Butters. Typically, quarterly bottom-up EPS decreases over the course of a quarter. The previous record for upward revisions was 5.4% in the first quarter of 2018, after tax reforms under the former Trump administration were enacted.
Four main factors drove the increase in EPS estimates, Butters noted.
"First, it appears analysts may have been too aggressive in their downward revisions to EPS estimates during the first half of 2020 at the height of the COVID-19 lockdowns," he said. "Second, it appears expectations for overall economic growth have been rising as well."
"Third, rising commodity prices and interest rates appear to be driving some of the upward revisions to EPS estimates," he added. "Finally, companies in the S&P 500 have been much more optimistic in their EPS guidance than normal."
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12:43 p.m. ET: Shares of Softbank-backed real estate company Compass jump 18% above IPO price in public debut
Compass had priced its initial public offering at $18, or at the low end of its already reduced range. The deal raised $480 million for the about eight-year-old company.
The company also joins a long list of money-losing newly public firms. Net losses narrowed to $270.2 million in 2020 after totaling $388 million in 2019, while revenue grew to $3.7 billion from $2.4 billion.
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11:00 a.m. ET: Bank of America sees 'euphoric sentiment' in the markets, with sell-side indicator inching toward 'sell' signal
Equity allocations by sell-side strategists rose for a third straight month, indicating increasing froth in the markets, according to Bank of America.
In a new note Thursday, the firm said that its Sell Side Indicator tracking the stock allocations of sell-side strategists rose to 59.4% in March from 59.2% a month earlier. This set the indicator at a 10-year high, coming within one percentage point of the firm's contrarian "Sell" signal. The last time the indicator was closer to a "Sell" was in May 2007, after which the S&P 500 fell 7% over the next 12 months, according to the strategists.
"Increasingly euphoric sentiment is a key reason for our neutral outlook as the cyclical rebound, vaccine, stimulus, etc. is largely priced into the market," the strategists led by Savita Subramanian said in a note.
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10:48 a.m. ET: Construction spending dips less than expected in February, despite inclement weather
Construction spending fell 0.8% in February over January, the Commerce Department said Thursday. This marked the first drop in spending since September, and followed a 1.2% monthly rise in January.
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10:07 a.m. ET: Manufacturing activity expands by the most since 1983: ISM
The Institute for Supply Management's March purchasing managers' index rose to 64.7 for the highest print in nearly four decades. This came in well above consensus estimates for a rise to 61.5 in March from February's 60.8. Readings above the neutral level of 50 indicate expansion in a sector.
Beneath the headline index, subindexes tracking prices paid, new orders and employment each came in stronger than expected.
Still, however, some economists warned that the manufacturing sector was not entirely out of the woods yet when it came to recovering from pandemic-related impacts. Supply chain issues have remained an exigent issue, noted Timothy Fiore, chair of the Institute for Supply Management Manufacturing Business Survey Committee.
“The manufacturing economy continued its recovery in March. However, Survey Committee Members reported that their companies and suppliers continue to struggle to meet increasing rates of demand due to coronavirus (COVID-19) impacts limiting availability of parts and materials," Fiore said in a statement. "Extended lead times, wide-scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are affecting all segments of the manufacturing economy. Worker absenteeism, short-term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing-growth potential."
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9:30 a.m. ET: Stocks open higher, Nasdaq gains 1%
Here's where markets were trading after the opening bell on Wall Street:
S&P 500 (^GSPC): +25.79 points (+0.65%) to 3,998.68
Initial jobless claims rose to 719,000 for the week ended March 27. This was greater than the 675,000 consensus economists were expecting, which would have marked a new pandemic-era low. However, the prior week's new claims were revised down to 658,000 from the 684,000 previously reported.
Continuing jobless claims also fell less than expected, declining to 3.794 million versus the 3.750 million anticipated. The prior week's continuing claims totaled 3.870 million.
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7:33 a.m. ET: Pfizer's vaccine shows strong efficacy after six months
The the latest analysis tracked individuals seven days through up to six months after the second dose, and showed 91.3% efficacy against COVID-19, versus the 95% efficacy the company reported earlier in November. The vaccine was also found to be 100% effective in preventing COVID-19 cases in South Africa, where one of the coronavirus variants has been prevalent.
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7:22 a.m. ET Thursday: Stock futures rise, Nasdaq futures outperform
Here's where markets were trading ahead of the opening bell Thursday morning:
S&P 500 futures (ES=F): 3,979.75, +12.25 points, or +0.31%
Dow futures (YM=F): 32,917.00, +19 points or 0.06%
Nasdaq futures (NQ=F): 13,212.00, +122.25 points or 0.93%
