Stocks climbed to fresh all-time highs on Wednesday, with investors looking ahead to a key Federal Reserve event later this week.
The S&P 500 touched an intraday record, led higher by gains in the cyclical financials, energy and industrials sectors. The Nasdaq also set a record intraday high. The Dow gained as shares of American Express, JPMorgan Chase and Goldman Sachs outperformed.
Stocks have marched higher amid optimism over continued strength in corporate profits and economic activity, even as growth rates on both these fronts look poised to slow after an initial reopening surge. Retailer Best Buy (BBY) posted second-quarter results that exceeded consensus estimates earlier this week, and the company also boosted its full-year sales guidance in a move that reaffirm that heightened consumer spending on electronics was continuing into the second half of the year. Later Wednesday, companies including Salesforce (CRM) and Ulta (ULTA) are poised to report results.
More movement on legislation that would increase government spending on physical and human infrastructure added to investor sentiment. Late Tuesday, the House of Representatives voted to move forward with a $3.5 trillion budget plan, laying the groundwork for a major economic package that would address issues including health care, child care and climate change. As part of the legislative action, the House also set up a final vote on the $1.2 trillion infrastructure bill passed in the Senate earlier this month.
“That stimulus … is going to be put into the economy over the next 8 to 10 years. So that’s a huge tailwind for our markets, with that continued spending to increase,” Loreen Gilbert, Wealthwise Financial CEO, told Yahoo Finance. “And so when investors ask me that question [of ‘where do we go from here’], I say, look to the stimulus, and don’t fight that stimulus, just like we say don’t fight the Fed.”
This week’s trading has also seen a resurgence in “meme stocks,” or shares that have been popularized on social media platforms including Reddit. GameStop (GME) shares gave back some gains on Wednesday, however, after rising 28% on Tuesday for their best day since March. AMC Entertainment (AMC) and BlackBerry (BB) also steadied after a surge earlier this week.
U.S. equities are also hovering near all-time highs ahead of the Federal Reserve’s virtual Jackson Hole Symposium, which kicks off on Thursday. After last week’s July Federal Open Market Committee meeting minutes came off as more hawkish than many market participants were expecting, more clues on the path forward for monetary policy remain a key focal point. Namely, traders are looking to see whether central bank officials signal when they will announce and implement tapering of their crisis-era asset purchase program.
“What the market really wants to hear is … that the Fed is willing to adjust if in fact the Delta variant does have a negative impact on the economy going forward,” Kristina Hooper, Invesco chief global market strategist, told Yahoo Finance. “And so that is going to be the key message — that willingness to be flexible depending upon what happens to the U.S. economy, that it is not full speed ahead adhering to a taper timeline.”
Other strategists also suggested that a “wait and see” approach from the Fed would be the most welcome outcome from equity investors.
“While we’ve seen the progress on the labor market that I think the Fed wanted to see … we’re obviously experiencing this temporary setback in terms of growth momentum,” Aneta Markowska, Jefferies chief financial economist, told Yahoo Finance. “It makes it difficult for the Fed to signal anything and to commit to any taper timeline at this point, but I think they do have to acknowledge that we have made further progress on those goals.”
10:02 a.m. ET: What to expect from Jackson Hole: TD Securities
Market participants are anxiously awaiting remarks from Federal Reserve officials at Jackson Hole, with these set to offer more perspective on how central bankers are thinking about the monetary policy path forward.
The Fed will have to thread the needle between acknowledging lingering risks due to the virus while also nodding to the progress still being made in the economic recovery, according to many strategists.
“I think what the market now is struggling with — with the rise in the Delta variant — is the economic outlook and how high are the risks and are the risks all to the downside, or are there risks to the upside in inflation,” TD Securities Managing Director Priya Misra told Yahoo Finance Live on Wednesday.
“Jackson Hole is not a Fed meeting – it is where they do talk about longer-term framework issues,” she added. “And I think this is [Fed Chair Jerome Powell’s] chance to link the framework review, the flexible average inflation targeting [FAIT] framework that they launched last year, to the exit. To talk about how they can taper by the end of the year, they can hike well after that … and that’s all consistent with the FAIT principle. Now that they are getting spooked by inflation, just trying to put the exit in the context of the FAIT approach with the risks that abound, I think that’s what we’ll be watching for.”
9:30 a.m. ET: Stocks open slightly higher
Here’s where markets were trading Wednesday morning:
S&P 500 (^GSPC): +4.65 (+0.1%) to 4,490.89
Dow (^DJI): +2.98 (+0.01%) to 35,369.24
Nasdaq (^IXIC): +13.50 (+0.09%) to 15,028.79
Crude (CL=F): +$0.21 (+0.31%) to $67.75 a barrel
Gold (GC=F): -$11.40 (-0.63%) to $1,797.10 per ounce
10-year Treasury (^TNX): +0.7 bps to yield 1.297%
9:06 a.m. ET: Durable goods orders declined less than expected in July
Orders for U.S. manufactured held up more solidly than economists were expecting in July, pointed to sustained growth in the goods-producing sector.
Durable goods orders dipped by 0.1% in July, according to the Commerce Department’s preliminary monthly report. This followed a 0.8% in rise in June.
A drop in new orders for transportation equipment dragged down the overall index. Excluding transportation, durable goods orders increased by 0.7%, or faster than the 0.5% rise expected.
Non-defense capital goods orders, excluding aircraft, were flat on the month after a 1.0% rise in June. This metric serves as a closely watched measure of business investment plans. Shipments of these orders, which factors into GDP, increased by a better-than-expected 1.0%, however.
7:27 a.m. ET: Mortgage applications rebounded last week as rates dipped
Mortgage applications rose last week to recover after a drop during the prior period, data from the Mortgage Bankers Association (MBA) showed Wednesday.
Overall applications were up 1.6% during the week ended August 20, following a drop of 3.9% during the previous week. Home purchases led the advances, with these rising 3% week-on-week on a seasonally adjusted basis to reach the highest level since early July. Still, however, purchases were 16% lower compared to the same week last year, on an unadjusted basis. Refinances increased 1% compared to last week, and 3% versus last year.
“Treasury yields fell last week, as investors continue to anxiously monitor if the rise in COVID-19 cases in several states starts to dampen economic activity. Mortgage rates slightly declined as a result, with the 30-year fixed rate decreasing for the first time in three weeks,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a press statement. “Lower rates led to an increase in refinance applications, with government loan applications jumping 10% to the highest level since May 2021.”
7:20 a.m. ET Wednesday: Stock futures drift sideways ahead of Jackson Hole
Here’s where markets were trading Wednesday morning:
S&P 500 futures (ES=F): +0.75 points (+0.02%) at 4,483.25
Dow futures (YM=F): +14.00 points (+0.04%) to 35,328.00
Nasdaq futures (NQ=F): -2.0 points (-0.01%) to 15,353.50
Crude (CL=F): +$0.20 (+0.3%) to $67.74 a barrel
Gold (GC=F): -$14.00 (-0.77%) to $1,794.50 per ounce
10-year Treasury (^TNX): +1.9 bps to yield 1.309%
6:07 p.m. ET Tuesday: Stock futures hover near record highs
Here’s where markets were trading Tuesday evening:
S&P 500 futures (ES=F): +1.25 points (+0.03%) at 4,483.75
Dow futures (YM=F): +16.00 points (+0.05%) to 35,330.00
Nasdaq futures (NQ=F): +4.5 points (+0.03%) to 15,360.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
Read more from Emily: