U.S. stocks rose slightly Thursday morning as investors prepare for the second half of 2021.
The Dow Jones Industrial Average was up about 86 points while the S&P 500 added 0.3% to hit a new intraday record high. The tech-heavy Nasdaq Composite lost 0.3%.
Early trading was relatively calm, although the proportions of reopened cruise lines and airlines increased. Energy stocks showed strength as West Texas Intermediate crude surged above $ 75 a barrel. Chevron’s shares rose 1.3%, making the stock one of the top performers in the Dow.
Walgreen Boots Alliance stocks fell more than 6% despite a better-than-expected earnings report that weighed on an average of 30 stocks.
A string of strong economic news continued on Thursday as initial weekly jobless claims hit 364,000, marking a low point in the pandemic era. Economists polled by Dow Jones expect 390,000 initial jobless claims last week, up from 415,000 in the week ending June 19. In addition, the Institute for Supply Management’s June production index showed expansion roughly in line with expectations.
The big averages ended a strong first half of 2021 and second quarter on Wednesday.
For the year, the Dow is up 12.7% and is roughly 1.7% below its all-time high. The S&P 500 gained 14.4% in the first half of 2021 and the tech-heavy Nasdaq Composite rose 12.5%.
The S&P 500 posted its fifth consecutive positive month, rising 2.2% in June. The broad index also had its best first half since 2019.
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“Better news on Covid, vaccinations, reopenings, economic growth and profits have fueled progress. Almost equal profits were achieved in both quarters through a rotation in leadership that enabled broad participation, ”said Jim Paulsen, Chief Investment Strategist of the Leuthold Group.
The small-cap Russell 2000 surged more than 17% in the first six months of the year as the economy turned heavily into value stocks as the economy reopened after the Covid-19 pandemic. However, smaller companies and value stocks seemed to have lost momentum in the past few weeks, while big tech stocks have regained a foothold.
Brent Schutte, chief investment strategist at Northwestern Mutual, said he believes that reversal will prove temporary as the economic recovery continues.
“I think the inflation fears have somehow settled and investors thought that we might be further along the cycle than I think we actually are. … I still think you have enough economic momentum that growth will stay strong. maybe on a plateau for the next year, which to me means that you still want to invest in things where earnings growth is more of a cyclical nature, “said Schütte.
Paulsen also said that the path of inflation and economic growth should determine market leadership in the second half of the year.
“If inflation fears continue to calm down and bond yields stay low longer, expect growth and technology stocks to continue to drive the stock market higher. Leadership should focus on cyclical stock sectors, small-cap stocks and even international stocks,” said Paulsen.
Historically, a strong first half for the stock market bodes well for the rest of the year. Whenever there was a double-digit increase in the first half of the year, the Dow and S&P 500 never ended this year with an annual decline, according to Refinitive data from 1950.
If the S&P 500 was up more than 12.5% at the start of the year, the second half of the year has an average increase of 9.7%, according to LPL Financial data from the 1950s.
The most anticipated business news this week is Friday’s monthly job report. According to a Dow Jones poll, economists expect 683,000 new jobs in June.
On Wednesday, the Dow Jones Industrial Average rose 210 points, supported by a 2.7% pop in Walmart. The S&P 500 was up 0.13% to close on a new high of 4,297.50. The Nasdaq Composite was the relative underperformer, down 0.2% as Facebook, Amazon, Netflix and Google parent Alphabet closed lower.
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