SHARES in the US reached record highs on Thursday, helped by strong company earnings and solid economic growth data. This is despite the Federal Reserve’ message earlier this week that it is in no hurry to taper stimulus, which pinned the dollar in its lowest this month.
Following a spate of strong corporate earnings reports from Ford Motor Co to KFC owner Yum Brands Inc overnight, investors were further cheered by data showing the US economy grew at a solid annualised pace of 6.5% in the second quarter.
“Today is a follow-on from really good earnings last night, which is great news,” said Inverness Counsel chief investment strategist Tim Ghriskey. “The expectation is that we will continue to see good earnings.”
The volley of positive news boosted the Dow Jones Industrial Average to a record high of 35,171.52 points before closing up 0.4%. The S&P 500 also jumped to an all-time high of 4,429.97 points before finishing 0.4% higher, while the Nasdaq Composite added 0.3%.
Equity markets elsewhere were also buoyant as investors digested news of bumper financial earnings in Europe, while reports that Chinese regulators had called banks overnight to soothe concerns about a widening regulatory crackdown further brightened the mood.
The pan-European STOXX 600 index climbed 0.46%, having also hit a record high of 464.31 points earlier, and MSCI’s gauge of stocks across the globe gained 0.9%.
Chinese blue-chip shares rebounded 1.9%, and the Hang Seng Tech Index, the target of heavy selling recently, gained 3.8%, though it was still down 4% for the week.
The market exuberance did not extend to the dollar, which languished as investors digested the Federal Reserve’s remarks on Wednesday that the strength of future economic data will determine when it starts to taper its bond purchases.
The dollar index fell 0.38% to 91.898, a level last seen on June 29. A sluggish dollar hoisted the euro up 0.35% to US$1.1887, its highest in more than three weeks.
Treasury yields seesawed in choppy trade, as investors grappled with the conflicting signals of the Fed’s dovish tone and the run of positive economic and corporate news.
By early Thursday evening, benchmark 10-year yields were flat at 1.263%, unchanged from Wednesday. Two-year yields edged lower, however, pulling back to 0.2035% from 0.211% .
Gold investors cheered the prospect that a dovish Fed more focused on supporting economic growth than tempering price pressures could bode well for bullion, seen as a hedge against inflation.
Spot gold added 1.2% to US$1,827.79 an ounce while US gold futures gained 1.58% to US$1,828.10 an ounce.
Oil prices were also firm as data showed crude stockpiles in the United States, the world’s top oil consumer, fell to their lowest since January 2020, with Brent crude oil prices pushing back above US$75 a barrel.
US crude recently rose 1.64% to US$73.58 per barrel and Brent was at US$76.06, up 1.77% on the day. – July 30, 2021
