By Joe Wallace and Michael Wursthorn
U.S. stocks mounted a late-session turnaround Thursday, closing
at session highs, following upbeat corporate earnings and signs of
continued improvement in the labor market.
Stocks rallied in the last hour of trading as investors snapped
up shares of everything from consumer staples to banks to
technology companies. The S&P 500 ended just shy of a record
after bouncing around the flatline earlier in the day, while the
Dow Jones Industrial Average jumped more than 300 points, notching
a fresh watermark. The Nasdaq Composite also got a boost, closing
in the green and snapping a four-day losing streak.
Earnings factored into the stock market's biggest gainers as
shares of Kellogg led the S&P 500 higher after topping
analysts' forecasts.
The moves also followed new data from the Labor Department
showing that jobless claims had slipped below 500,000 last week for
the first time during the Covid-19 pandemic, suggesting the
economic recovery continues. The economy's rejuvenation this year
has been a key driver behind the S&P 500's 11% gain so far this
year, with most of the benefits going into companies that are more
closely tied to the U.S. economy.
"We should see cash flows and company cash flows really improve,
especially with the reopenings happening," said Mary Nicola, a fund
manager at PineBridge Investments. Although valuations are high,
stocks remain attractive compared with low-yielding bonds, she
added.
Investors will get a clearer picture of the jobs front on Friday
after the Labor Department releases its April jobs report. Analysts
predict U.S. employers added 1 million jobs last month.
On Thursday, the S&P 500 rose 34.03 points, or 0.8%, to
4201.62, leaving it 0.2% away from its April 29 record. The Dow
industrials added 318.19 points, or 0.9%, to 34548.53, closing at
its 23rd record of the year, while the Nasdaq advanced 50.42
points, or 0.4%, to 13632.84.
Shares of Kellogg rose $4.46, or 7.1%, to $67.53 after the food
company topped analysts' quarterly projections and raised its
guidance for the year. The S&P 500's consumer staples sector
gained 1.3%.
PayPal shares rose $4.62, or 1.9%, to $252.02 after the digital
payments company bumped up its revenue guidance for the year.
Tech and communication stocks in the S&P 500 gained 1% and
1.1%, respectively. Financial stocks added 1.4%.
Healthcare stocks notched the smallest gain of the S&P 500's
11 sectors, rising less than 0.1%. The sector had been trading in
the red most of the day after U.S. Trade Rep. Katherine Tai said
the U.S. would support waiving intellectual property rights to
potentially enable companies in developing countries to manufacture
their own versions. That sent shares of several Covid-19 vaccine
makers lower until reports that German Chancellor Angela Merkel
pushed back against the plan helped them recoup some of their
losses.
Moderna fell $2.34, or 1.4%, to $160.50. Pfizer shed 39 cents,
or 1%, to $39.19, while Johnson & Johnson closed up 67 cents,
or 0.4%, to $167.74.
And shares of Etsy dropped $26.89, or 15%, to $157.68 after the
company predicted a slowdown ahead despite posting strong results
for the first quarter.
About 85% of the companies in the S&P 500 have reported
first-quarter results through Thursday morning, posting a 50%
growth in profits from the same period a year earlier, according to
FactSet. Analysts say the solid results highlight the breadth of
the economic recovery, while also giving investors a new reason to
buy stocks despite concerns of elevated valuations.
Still, some analyst say there are signs the rally that began
last March is beginning to flag. Despite the massive profit growth
and high number of surprises to the upside, just 57% of companies
that reported results so far have seen shares subsequently rise,
according to FactSet. Besides that, tech stocks, the engine behind
2020's rally, remain highly volatile as the Nasdaq is on course to
notch its first monthly decline since October.
"Although the S&P is just 1% off its high, I think equity
markets are beginning to look very fatigued," said Paul O'Connor,
head of multiasset investments at Janus Henderson.
Indicators including surveys by the American Association of
Individual Investors suggest investors are almost uniformly
bullish, a setup that tends to precede a pullback in stocks,
according to Mr. O'Connor.
"There are such high expectations embedded in markets that we're
going to need a steady stream of good news just to maintain the
current prices, " he said.
Write to Joe Wallace at Joe.Wallace@wsj.com and Michael
Wursthorn at Michael.Wursthorn@wsj.com
(END) Dow Jones Newswires
May 06, 2021 17:10 ET (21:10 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.