US markets extend gains to hover below record closing highs
01:58, 22 July 2021
US markets extended gains on Wednesday as investors shrugged off concerns about rising Delta variant coronavirus cases and peaking economic growth to focus instead on the earnings season.
Blue-chip Dow Jones Industrial Average Index rose 0.8% to 34,798 points, the broader S&P 500 Index gained 0.8% to 4,358.69 points and the tech-heavy Nasdaq Composite Index advanced 0.9% to 14,631.95 points on Tuesday.
US Treasury 10-year yield continued its recovery after hitting a five-month low mid-session on Tuesday. The US dollar index inched up about 0.1% to 92.81, hovering below a three-month high of 93.161 hit during Monday’s equities sell-off.
Powell frontrunner for second term
Rumours that US Federal Reserve chair Jerome Powell could be selected for a second term as Fed chief is driving up Treasury yields, said Robert Carnell, regional head of research (Asia-Pacific) at ING.
“This, the reasoning goes, means that the Fed will be more likely to maintain its dovish stance, and keeps hawks like Bullard and Kaplan in check,” Carnell said in a note.
“A prolonged dovish policy will help to keep growth hopes alive, and allows for higher bond yields through both a higher real yield and higher inflation expectations,” Carnell added.
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Mid-cycle transition
On Wednesday, the US markets continued recovery from recent sell-offs with all three benchmark indices less than 1% off record closing highs.
Andrew Sheets, chief cross-asset strategist at Morgan Stanley said that while overall growth of the economy is good, the rate of change has peaked. Sheets added that the US equity markets are currently in a “mid-cycle transition” which often leads to lower valuations and more defensive leadership.
“Don't read recent weakness as a sign that the economy is about to materially weaken, but do brace yourself for more choppiness as this mid-cycle transition continues to play out,” Sheets said on Morgan Stanley’s Thoughts On The Market podcast.
Johnson & Johnson vaccine boost
Johnson & Johnson rose 0.6% to $169.49 after the pharmaceuticals and consumer products company said it expects about $2.5bn sales in 2021 from its COVID-19 vaccine sales.
Coca-Cola shares closed 1.3% higher at $56.55 following strong earnings reported by the global beverage company. Coca-Cola said it expects to generate free non-GAAP cash flow of at least $9bn in full year 2021.
Verizon Communications climbed 0.7% to $55.95 after the telecommunications company upgraded full year total wireless service revenue growth outlook to 3.5% to 4% from prior guidance of at least 3%.
Chipotle on fire
Chipotle Mexican Grill was the biggest percentage gainer on the S&P 500 index. Shares of the restaurant chain surged 11.5% to $1,755.99 after the company reported an over 30% year-on-year jump in its comparable restaurant sales in the June quarter. The company said quarterly digital sales grew 10.5% year-on-year and accounted for nearly 50% of total sales.
Among the losers, weakness in Netflix shares extended as investors sold shares of the video streaming company after it reported slow subscriber growth on Tuesday.
Harley-Davidson closed 7.2% lower at $40.65 after the company cut its full year operating income margin guidance from motorcycle sales to a range of 6% to 8% from a range of 7% to 9%.
Meme stocks and crypto
Elsewhere, meme stocks AMC Entertainment Holdings fell 5.4% to $40.78 and GameStop slipped 2.8% to $5.37.
Among cryptocurrencies, bellwether Bitcoin was up 7.8% to $32,016.24 and alt-coin Ethereum rose 12.3% to $1,983.93 at 0255 BST (+1GMT) on Thursday.
Read more : Bitcoin and Ethereum make big gains after Musk remarks
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