(Bloomberg) — U.S. stocks completed the fastest-ever return to a record after a drop of at least 20%, surpassing February highs for the first time since the pandemic upended financial markets. The dollar fell to the lowest in more than two years, while Treasuries advanced.
The S&P 500 eked out a gain, capping a 52% rally from its March low. Technology shares pushed the gauge above its Feb. 19 closing record after failed attempts in three of the past four sessions. Amazon.com Inc. paced the advance on Tuesday, extending its surge this year to 79%. Homebuilders also rose as a report showed housing starts increased the most since 2016. Lennar Corp. and D.R. Horton Inc. boast returns of at least 148% since the stock-market bottom.
Massive stimulus injections and a surge in technology companies have driven the rebound in American equities from a pandemic-induced selloff. Daily coronavirus case counts, positive test rates and hospitalizations look to be improving — as evidence grows that the peak of the flareup across Sunbelt states is in the past. While stimulus talks have stalled, better-than-feared economic data and corporate earnings have instilled optimism that a recovery is taking shape.
“Momentum is currently positive as the actions of the Fed and other major central banks continue to drive yield-seeking investors into racier equities and away from bonds,” said Fawad Razaqzada, an analyst at ThinkMarkets. “While things could look a lot different in the not-too-distant future, the short-term picture certainly looks bullish right now.”
The S&P 500 headed toward its fifth straight month of gains, which would be the longest winning streak since September 2018. Since the gauge’s March 23 bottom, all major groups have rallied, with consumer-discretionary and technology shares jumping at least 63%.
The advance in stocks defies concerns over lofty valuations amid a still uncertain outlook for the economy. House Speaker Nancy Pelosi indicated that Democrats might cut their stimulus proposal to seal a deal with Republicans and speed Covid-19 relief, then come back after the November elections with additional agenda items. Meanwhile, China denounced the U.S.’s latest moves to curb Huawei Technologies Co.’s access to commercially available chips, the latest blow in an increasingly tense relationship between the world’s two biggest economies.
The fact that the benchmark is breaking through a record may be psychologically interesting, but these milestones should be taken in stride, according to Chris Larkin, managing director of trading and investment product at E*Trade Financial.
“It may hold some short-term importance for traders who have built this into their strategy, but for the most part, anybody participating in the market should look past these relatively arbitrary moves and focus more on fundamentals,” he said.
As the S&P 500 pushes higher, one indicator may boost the confidence of equity bulls. The benchmark’s cumulative advance-decline line is still near its peak. That signals broad participation is supporting the rally, as technical analysts often suggest breadth leads price, and any near-term pullback will be shallow and short. For more market commentary, see the MLIV blog.
Some other corporate highlights:
- Walmart Inc., whose shoppers were a major beneficiary of stimulus checks earlier this year, is bracing for a second half where pandemic-hit shoppers without continued government relief may be forced to go it alone.
- Home Depot Inc. reported sales growth that was more than double the already brisk rate analysts had been expecting, but rising expenses meant flat margins in an otherwise standout quarter.
- Kohl’s Corp. posted a quarterly loss and declining sales, a sign of the struggle of many retailers amid pandemic uncertainty.
Here are some key events coming up:
- Target Corp. and Nvidia Corp. report on Wednesday. Results from Alibaba Group Holding Ltd. and Qantas Airways Ltd. are due Thursday.
- Minutes of the latest FOMC meeting are due Wednesday.
- The EIA’s crude oil inventory report comes out Wednesday.
- The Joint Ministerial Monitoring Committee — the panel that reviews the OPEC+ agreement — is due to meet on Wednesday.
- U.S. jobless claims for the week ended Aug. 15 are due Thursday.
- China’s loan prime rate is due Thursday.
- Euro-area PMIs will be released on Friday.
These are some of the main moves in markets:
- The S&P 500 rose 0.2% as of 4 p.m. New York time.
- The Stoxx Europe 600 Index dipped 0.6%.
- The MSCI Asia Pacific Index rose 0.5%.