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Shares rose to new highs as the Dow and S&P 500 closed record highs. Investor confidence has been strengthened by economic data points.
Shares rose to new highs on Friday in terms of two key developments, strengthening investor confidence in the economy.
Dow Jones Industrial Average
increased by 164.68 points, or 0.48%, to close at 34,200.67, and
S&P 500
added 15.05 points, or 0.36%, to close at 4,185.47; both indices recorded closing records.
Nasdaq Composite
reached 13.58 points, or 0.10%, to close at 14,052.34. The biggest winner in the S&P 500 was the chemical company
PPG Industries
(marker: PPG), which saw shares rise 8.9% on strong profit.
Pfizer
(PFE), CEO Albert Bourla, said patients who have been fully vaccinated will likely need annual booster shots to protect themselves against new strains of Covid-19. He compared the virus and its necessary outbreaks to the flu. This indication of confidence in Pfizer’s ability to protect people against the virus gives investors confidence that the virus can be kept at a distance, reopenings can remain intact, and the trajectory of the economy will remain upward. Pfizer increased 2.5%.
Another positive thing: the growth of China’s gross domestic product for the first quarter of the year was 18.3%, the fastest pace so far, although it missed estimates of 19.2%. However, the latest figure reflects an economy that is recovering more than suddenly. This bodes well for global economic growth in general, but could also be interpreted as an encouraging signal about US economic demand, as the US imports in bulk from China.
The internal movements of the stock market confirmed the optimism; value stocks – representing mature companies in their first gains – were the most successful.
Vanguard S&P 500 Value
ETFs (VOOV) rose 0.6%
growth counterpart
(VOOG), which increased by 0.2%. Growth companies, which bet for a longer period of time for full profitability, are less sensitive to the perceived state of the current economy.
Friday’s valuable performance was also helped by a return to 10-year Treasury yields. Higher, long-term returns, which erode the value of future cash flows, put undue pressure on current valuations of growing companies.
“Yesterday’s decline in 10-year yields is unsustainable,” Tom Essaye, founder of Sevens Report Research, wrote in a note Friday.
Yield fell to 1.55% on Thursday after hitting 1.74% in mid-March, but it’s no surprise to see a 1.58% return on Friday; yield is still below the expected long-term rate of inflation and is often above historical inflation.
We’ll see if optimism continues over the weekend until Monday.
Write to Jacob Sonenshine at [email protected]