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S&P 500, Nasdaq Composite extend record run as Dow posts 4th straight day of gains

By Joy Wiltermuth and Mark DeCambre

Nasdaq Composite, S&P 500 post best 5-day percent gain in a month

U.S. stock indexes closed further in record territory Wednesday, with the Dow Jones Industrial Average extending its gains to a fourth straight day.

The move higher for equities comes as strong second-quarter corporate earnings offset doubts about the pace of economic recovery, even with the coronavirus delta variant limiting consumer and business activity in some countries.

What did major stock index do?

On Tuesday, the Dow climbed 30 points to end at 35,366, while the S&P 500 closed at another daily record at 4,486 and the Nasdaq Composite topped 15,000 points for the first time.

What drove markets?

Investors pushed equities higher Wednesday, with the S&P 500 index putting in its 51th all-time high of 2021 and the Nasdaq Composite booking its 30th record close of the year.

"There's all kinds of cash all over the place, and people are looking for places to put cash to work," said Mike Mullaney, director of global markets research at Boston Partners, in a phone interview.

Recently, there's been renewed buying in shares of big U.S. technology giants, or "safety stocks" that helped propel equities higher after the spring 2020 restrictions took hold, he said.

Mullaney attributed the popularity of tech stocks to the climb in COVID infections and hospitalizations due largely to the coronavirus delta variant, but also to "tapering potentially on the horizon," as investors have grown a bit more defensive.

But for now, ample liquidity provided by the Federal Reserve and by lawmakers in Washington in the form of fiscal support remains in focus.

"For sure, the liquidity from Congress and the Federal Reserve has been unprecedented," said Joe Quinlan, head of CIO market strategy for Merrill and Bank of America Private Bank. "But it's done its job."

Quinlan argues that the private sector remains ready to step forward and drive economic growth when the Fed decides to cut back its support, including by reducing its large-scale asset purchases. "There's going to be handoff," he told MarketWatch. "I'm not worried about tapering."

The deluge of buybacks in the financial sector this year also suggests a feeling of resilience among top banking CEOs, with share repurchase volumes now overtaking the tech sector.

Recent activity in Washington also points to future fiscal support for the economy. House Democrats approved a $3.5 trillion budget resolution late Tuesday and advanced the $1 trillion bipartisan infrastructure bill.

The fiscal influx would come as strong second-quarter results from American corporations already have helped to buoy stock-market optimism. Of the S&P 500 index companies that have reported second-quarter results, through last Friday, nearly 90% of them delivered results above expectations, marking the highest such tally on record, dating back to 1994, according to data compiled by Refinitiv.

"Let's face it second-quarter earnings are on the books and they are spectacular," Karyn Cavanaugh, chief investment officer at Carolinas Wealth Management, told MarketWatch in an interview. "I think the bias is to the upside and I think we are going to continue to grind higher," the CIO said.

Looking ahead, Fed Chairman Jerome Powell may give some clues as the timing of any tapering of its bond purchases on Friday at the annual Jackson Hole central bankers symposium, held online for the second year in a row.

"All eyes are on the Fed," Quinlan said, adding that while Powell might hint on Friday about talk of tapering, that's different than immediately tightening financial conditions. "There's still a lot of liquidity looking for a place to go. And the first stop is U.S. equities."

In COVID news, Johnson & Johnson (JNJ) released interim clinical data that indicates Americans who have received its single dose COVID-19 vaccine should get a second dose. The company said that two studies examining people who had received its shot found that a second dose boosted antibody levels. The studies haven't yet been published in a medical journal.

Which companies were in focus?

How did other markets fare?

Jack Denton contributed reporting

-Joy Wiltermuth


(END) Dow Jones Newswires

08-25-21 1633ET

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