Stocks rose to another record on Thursday as solid corporate earnings and the easing of trade war tensions added to Wall Street’s strong start in 2020.
The S&P 500, the Nasdaq composite and the Russell 2000 indexes all ended the day in record territory. Tech and semiconductor shares, which had been sensitive to worries about the trade war and the slowdown of the global economy last year, led the gains. Google’s parent, Alphabet, closed at a market capitalization of $1 trillion for the first time.
After a 0.8 percent climb Thursday, the S&P 500 is up some 2.7 percent in January, showing that the nearly 11-year-old bull market still has plenty of legs left.
The sunny optimism of the stock market may seem surprising in the context of widespread political turbulence in the United States and around the world. On Thursday, the Senate formally opened the impeachment trial of President Trump. And just a couple of weeks ago, outright war between the United States and Iran seemed a distinct possibility.
But from the perspective of investors, the forecast looks downright balmy.
The American economy continues to grow. The unemployment rate is near a 50-year low, buttressing consumer spending. Inflation remains quiescent. Plus, interest rates are low and the Federal Reserve, which cut rates three times in 2019, appears to be in no rush to raise them.
Giant tech firms such as Apple and Microsoft, which exert outsize sway on broad market indexes because of their size, also continue to climb. On Thursday, Microsoft rose about 1.8 percent, after announcing plans to become carbon negative by 2030.
In rising above $1 trillion, Alphabet joined an elite club of American tech companies with valuations that were once unthinkable. The only other American companies with that kind of valuation are Apple and Microsoft.
Globally, the economic picture could be brightening slightly. Chinese exports climbed more than expected in December. Recent numbers have shown a slight rebound for the eurozone’s struggling industrial sector.
“Economists had expected and priced in some pretty poor economic data,” said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute. “But it’s coming in better than expected in a lot of regions.”
On Thursday, the American markets outperformed their foreign counterparts. The Shanghai Composite in China was down 0.5 percent. In Hong Kong, the Hang Seng rose 0.4 percent. And the Nikkei in Japan eked out a 0.1 percent rise. The CAC-40 in France rose 0.1 percent, and the FTSE 100 in Britain fell 0.4 percent.
The twist of lemon to the rally cocktail this week has been the wave of fourth-quarter earnings results. On the whole, analysts expect that earnings for S&P 500 companies will be down slightly compared with the same period in 2018.
But big Wall Street banks such as JPMorgan Chase, Citigroup and Morgan Stanley have announced surging profits. Morgan Stanley’s shares rose 6.6 percent after it posted better-than-expected results on Thursday.
“We have no evidence that 2020 is going to be a difficult economic year,” James P. Gorman, Morgan Stanley’s chief executive, said on a post-earnings conference call with analysts. “Difficult politically, potentially geopolitically, but certainly the economic outlook remains very, very stable.”
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January 17, 2020 at 03:38AM
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