AUGUST 15, 2021
Trader John Panin, left, works on the floor of the New York Stock Exchange, Tuesday, Aug. 10, 2021. Stocks rose in morning trading on Wall Street Tuesday as energy companies and banks clawed back some of the ground they lost a day earlier. (AP Photo/Richard Drew)
Stocks rose to fresh highs Wednesday to extend gains from a day earlier, with optimism over an in-line inflation print and passage of a major infrastructure bill in the Senate helping boost equities.
The S&P 500 and Dow gained, with shares of industrials and materials companies, as well as other names closely tied to the economic recovery, leading the way higher. Equities took a leg higher in the pre-market session after the Labor Department’s consumer price index rose at the expected 0.5% monthly rate in July, helping assuage investors’ concerns over unchecked inflation during the recovery.
U.S. West Texas intermediate crude oil futures fell more than 1% after CNBC reported the White House had requested that OPEC and its allies further increase production in order to meet rising demand for energy during the recovery.
Elsewhere, developments out of Washington also helped fuel the latest move to new highs in equities, with the Senate passing a more than $1 trillion infrastructure plan with bipartisan support. The plan – which includes a number of Biden administration priorities to help revamp roads and bridges nationwide as well as boost environmental and broadband initiatives — next heads to the U.S. House of Representatives.
Despite some uncertainty over the future of the bill in the House, investors clung to optimism that the plan will ultimately be signed into law, providing yet another infusion of government support into the recovering economy.
“Realistically, what an infrastructure bill is going to mean is additional spending into the economy. Just like the stimulus has helped the economy for the last year, that’s more money that can be going into the economy and helping businesses get through the slump they have been in previously,” Courtney Dominguez, senior wealth advisor for Payne Capital Management, told Yahoo Finance. “Generally speaking, the economy looks to be on good footing, and this is only going to be an added benefit on top of that.”
As a number of pundits have pointed out, data on the U.S. recovery has come in mostly strongly, especially in terms of the demand side of the economy. The National Federation of Independent Business’ small business optimism survey released Tuesday reflected a record high level of job openings for July, tracking with the pick-up in labor activity reflected in last week’s “official” government jobs report.
According to some strategists, this ongoing recovery in economic activity bodes well for cyclical and value stocks in the near-term. However, the specter of a growth deceleration in the coming months also makes the case for a balance approach with higher-growth stock names.
“You saw this strong jobs report on Friday, you saw the 10-year [Treasury yield] move up, and you immediately saw the pop in financials. Going forward, you’re going to continue to see those strong numbers, and I think that will continue to help the net interest margins of financials stocks,” Stephanie Lang, Homrich Berg Principal and chief investment officer, told Yahoo Finance. “As we move into later this year, I think the defensives are going to be strong, because I think there’s going to be more volatility and the earnings [comparisons over last year] are going to be tougher. We really like to have a barbell strategy where you have some of the cyclical names like financials, but have a barbell with tech names that are more secular growers and have acted more defensively.”
Meanwhile, earnings continued to trickle in from major corporations. Shares of Coinbase (COIN) advanced in early trading after the largest U.S. cryptocurrency platform reported second-quarter earnings and revenue that handily exceeded expectations, with both user growth and trading volumes surging despite crypto price declines late this spring. On Wednesday, companies including Bumble (BMBL), eBay (EBAY) and Sonos (SONO) are set to post quarterly results.
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4:05 p.m. ET: Dow gains 220 points, or 0.6% to reach a record close amid optimism over contained inflation, infrastructure
Here were the main moves in markets as of 4:05 p.m. ET:
- S&P 500 (^GSPC): +10.95 (+0.25%) to 4,447.70
- Dow (^DJI): +220.30 (+0.62%) to 35,484.97
- Nasdaq (^IXIC): -22.95 (-0.16%) to 14,765.14
- Crude (CL=F): +$0.99 (+1.45%) to $69.28 a barrel
- Gold (GC=F): +$22.10 (+1.28%) to $1,753.80 per ounce
- 10-year Treasury (^TNX): -0.3 bps to yield 1.3390%
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2:55 p.m. ET: NYSE to require vaccines for trading floor access starting in September: Reuters
The New York Stock Exchange will require that those accessing its trading floor on Wall Street will be required to be fully vaccinated against COVID-19 as of September 13, Reuters reported Wednesday, citing a memo from the NYSE.
The NYSE is also set to immediately begin expanding onsite random testing to those who have already been vaccinated, the report added.
The NYSE becomes the latest institution to implement a vaccine requirement for access, adding to a number of private sector companies unveiling similar moves. Citigroup recently said it would require employees to be vaccinated before returning to offices, and United Airlines became the first to require vaccinations of employees last week.
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1:29 p.m. ET: Airline stocks shake off earlier losses after Southwest issues warning on profit outlook
Southwest Airlines (LUV) on Wednesday wrote in a regulatory filing that it will be unlikely to turn a profit in the third quarter due to a slowdown in bookings and increases in cancellations amid the Delta variant’s spread.
The disclosure appeared to vindicate investors’ fears that the Delta variant’s spread would exert meaningful negative impacts on economic activity and company profits. Southwest now expects operating revenue in August to be down as much as 20% compared to 2019 levels, or worse than the 12% decline it experienced in July.
“The Company was profitable again in July 2021; however, the Company believes the recent negative effects of the pandemic on August and September revenue trends will make it difficult for the Company to be profitable in third quarter 2021, without taking into account the benefit of temporary salaries and wages cost relief provided by payroll support program proceeds,” Southwest said in its filing.
As recently as mid-July, Southwest Airlines had said it was targeting returning to profitability in the third and fourth quarters of this year. Shares were down as much as 2.6% intraday on Wednesday before recovering losses and following the broader market higher.
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1:19 p.m. ET: What’s next for the $1 trillion infrastructure package
Now that the U.S. Senate has passed a roughly $1 trillion infrastructure bill with bipartisan support, the legislation heads to the U.S. House of Representatives for approval.
The path forward for the legislation in that chamber may not be an easy one, however. Some Democratic members of that chamber have said they would not want to take up the infrastructure bill until the Senate passes more expansive legislation that would spend $3.5 trillion to address healthcare, child care, education and climate change initiatives. Republican lawmakers, however, have balked at the size and scope of this package.
Overnight, the Senate did pass a budget resolution on this package without any Republican support, with the budget resolution the first step in the process that lays the groundwork for potential passage via reconciliation. Still, the bipartisan support of the $1 trillion infrastructure bill in the Senate may incentivize House lawmakers to approve the bill on a standalone basis so as not to delay its passage.
“The following timeline is possible: bipartisan infrastructure bill is signed into law at the end of the month with the reconciliation package passing in late-October,” Bank of America economist Michelle Meyer wrote in a note Wednesday. “Adding to the mix, Congress will have to pass a continuing resolution by Sept 30th and address the debt ceiling by mid/late fall. They will be busy once Congress returns from the summer holiday. This time crunch has been noticed by the leadership of the Democratic party – House Majority Leader Hoyer already announced that the summer recess will be cut short and the chamber will return to session on Aug 23 to consider the budget resolution, assuming Senate adoption later this week.”
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10:26 a.m. ET: Shares of steelmakers, materials companies extend gains on back of infrastructure plan passage in the Senate
Stocks that would benefit from increased government spending on physical infrastructure extended gains on Wednesday following the Senate’s passage of a more than $1 trillion infrastructure proposal a day earlier.
In the S&P 500, the utilities and materials sectors outperformed and each gained nearly 1%.
Steelmaker Nucor Corporation (NUE) was one of the best-performers in the blue-chip index, gaining nearly 4% intraday on Wednesday to reach an all-time high. Vulcan Materials Company (VMC), Commercial Metals Company (CMC) and U.S. Steel (X) also advanced strongly,
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9:30 a.m. ET: S&P 500, Dow open at records after consumer price inflation data meets estimates
Here’s where markets were trading shortly after the opening bell:
- S&P 500 (^GSPC): +11.3 (+0.25%) to 4,448.05
- Dow (^DJI): +118.00 (+0.33%) to 35,282.46
- Nasdaq (^IXIC): +44.91 (+0.3%) to 14,832.82
- Crude (CL=F): -$0.93 (-1.36%) to $67.36 a barrel
- Gold (GC=F): +$13.20 (+0.76%) to $1,744.90 per ounce
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8:39 a.m. ET: Consumer price index rises 0.5% monthly pace in July, matching estimates
Consumer prices rose at a pace consistent with consensus estimates in July, the Labor Department reported Wednesday. Still, however, the rate of increases was well above pre-pandemic levels as reopening-related demand spikes and base effects continue to occur.
The consumer price index (CPI) rose 0.5% in July compared to June, according to the government’s latest monthly report. This was in-line with estimates, and pulled back from the 0.9% monthly rise from last month. The print came as price increases categories in some major categories cooled. Used car and truck prices, for instance, pulled back to post an only 0.2% monthly increase, down from the 10.5% surge posted in June.
Excluding food and energy prices, the CPI rose at 0.3% month-on-month, coming in a tick below the 0.4% rise expected.
Over last year, however, consumer prices unexpectedly held at the same rate as in June, coming in at 5.4% to match last month’s print as the highest level since 2008. Consensus economists were looking for a 5.3% rise.
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7:10 a.m. ET Wednesday: Stock futures point to a mixed open
Here’s where markets were trading Wednesday morning:
- S&P 500 futures (ES=F): -2.5 points (-0.06%) at 4,427.5
- Dow futures (YM=F): +19 points (+0.05%) to 35,174.00
- Nasdaq futures (NQ=F): -22 points (-0.15%) to 15,022.50
- Crude (CL=F): -$0.79 (-1.16%) to $67.50 a barrel
- Gold (GC=F): +$6.40 (+0.37%) to $1,738.10 per ounce
- 10-year Treasury (^TNX): +2.4 bps to yield 1.366%
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6:17 p.m. ET Tuesday: Stock futures edge higher
Here’s where markets were trading Tuesday evening:
- S&P 500 futures (ES=F): -0.5 points (-0.01%) at 4,429.5
- Dow futures (YM=F): +3 points (+0.01%) to 35,158.00
- Nasdaq futures (NQ=F): -0.75 points (-0.00%) to 15,043.75
Courtesy/Source: Yahoo Finance
