By Caitlin McCabe and Caitlin Ostroff
U.S. stocks edged higher Thursday as investors' optimism over
stronger-than-expected earnings overshadowed signs that the labor
market is still struggling to recover.
The S&P 500 and Dow Jones Industrial Average rose in recent
trading after swinging between gains and losses for much of the
day. The broad benchmark index gained 0.2%, while the Dow rose
about 50 points, or 0.2%.
The Nasdaq Composite also rallied, gaining 0.7%, propelled
higher by stocks including Apple and Amazon.com.
Despite a turbulent start to 2021, U.S. stocks have largely
continued to climb, with all three indexes currently up 2% or more
year-to-date. The Nasdaq, in particular, has posted a strong
performance, gaining 5% for the year, while the Russell 2000 index
of small-cap stocks has risen 8.8%.
Driving some of those gains has been optimism that further
economic recovery may be ahead under President Biden's new
administration. Mr. Biden has called for a $1.9 trillion Covid-19
relief plan that includes direct payments to households and more
money for testing and vaccine distribution. On Wednesday, the day
that Mr. Biden took office, the S&P 500 and the Dow posted
their best Inauguration Day performances since 1985, when Ronald
Reagan was sworn in for his second term, according to Dow Jones
Better-than-expected earnings reports have also buoyed markets
Still, the U.S. economy faces major obstacles, with fresh data
Thursday showing that about 900,000 Americans filed first-time
claims for unemployment benefits for the week ended Jan. 16, as
companies continued to lay off workers amid a surge in Covid-19
Meanwhile, the coronavirus pandemic continues to loom large. The
U.S. reported 4,200 deaths for Wednesday, the second-highest daily
Analysts say those factors -- along with Netflix's strong
earnings this week -- have renewed investor interest for
"stay-at-home stocks" that were popular for much of 2020.
Technology stocks were bright spots for the market Thursday, with
Apple gaining 3.3%. Amazon.com added 1.8%.
"You've got this rotation going on under the surface for a
second day in a row where the small-cap stocks and the cyclical
plays have been giving some back to the tech and stay-at-home
areas," said Ryan Detrick, chief market strategist for LPL
Financial. "We think this rotation back to the stay-at-home tech
names could have more legs to it."
"That's the lifeblood of a bull market -- to see a rotation," he
Traders this month have been closely eyeing earnings to see if
they support the strong run across markets in recent months. Many
investors are still betting on an economic recovery this year as
Covid-19 vaccinations ramp up, increasing prospects for future
Earning results so far have been better than expected, with the
number of companies in the S&P 500 beating estimates so far
hovering just below 90% as of early Thursday afternoon, according
to FactSet. Several companies have been rewarded by investors for
the strong earnings results.
Shares of Travelers, one of the nation's biggest sellers of
insurance to businesses and a top consumer-car insurer, climbed
2.6% Thursday after reporting that its net income surged in the
"Earnings season looks relatively good and seems to confirm this
picture that the U.S. -- because there was no full lockdown -- did
well in the fourth quarter," said Carsten Brzeski, ING Groep's
global head of macro research. "Stock markets are really looking
through the short-term outlook for the economy, which has worsened
over recent days."
Investors are also paying close attention to corporate guidance
in the sectors most affected by the pandemic. Shares of United
Airlines fell 5.3% after the airliner said late Wednesday it
expected the coronavirus to continue to weigh on travel demand this
In other corporate news, Ford Motor climbed 5.6%. Shares of the
company have jumped on upbeat analyst notes . Ford also holds a
stake in electric-vehicle startup Rivian Automotive, which raised
another $2.65 billion earlier this week.
In addition to expectations for possible stimulus ahead,
supporting markets is also the expectation that central banks and
governments will step in if financial conditions deteriorate. This
has encouraged investors to seek out higher returns, including in
Japan's Nikkei 225 Index rose 0.8% Thursday and is trading near
its highest level in 30 years. India's benchmark stock gauge, the
S&P BSE Sensex Index, hit a record high Wednesday. Indexes in
China and South Korea rallied Thursday, with the Shanghai Composite
up 1.1% and Korea's Kospi gaining 1.5%.
The pan-continental Stoxx Europe 600 added less than 0.1% after
the European Central Bank held steady on interest rates.
The backstop from governments and central banks -- plus
consensus among investors for a strong economic recovery this year
-- has squeezed volatility out of the market. The Cboe Volatility
Index, known as the VIX and seen as Wall Street's fear gauge, was
at 21.19 Thursday, down from 25.16 a month ago, but higher than the
historical average for the VIX is 19.48.
The yield on the benchmark 10-year Treasury note ticked up to
1.106% Thursday, from 1.089% Wednesday. Yields rise when bond
Write to Caitlin McCabe at firstname.lastname@example.org
(END) Dow Jones Newswires
January 21, 2021 15:30 ET (20:30 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.