By Ben Eisen and Sam Goldfarb
U.S. stocks climbed Wednesday, extending a steady August rally
that has pushed the S&P 500 to the cusp of its first record
close since the coronavirus pandemic brought the economy to a
The benchmark U.S. stock index has risen in all but one trading
session this month, buoyed by the prospect of declining coronavirus
cases at a time when the federal government and central banks are
still supporting the economy.
The S&P 500 opened modestly higher Wednesday and flirted
with record levels for much of the day, finally eclipsing
February's closing high in the final hour of the session. But the
index couldn't hold on, ending just shy of the record and setting
its second-highest close in history.
"There's optimism right now about an environment where the virus
situation gets better, but we still have a ton of stimulus in the
system, " Ilya Feygin, a managing director at broker-dealer
The S&P 500 ended the day up 46.66 points, or 1.4%, at
3380.35, drawing within 0.2% of the Feb. 19 high. It is now up 3.3%
in August and 4.6% for the year.
The Dow Jones Industrial Average climbed 289.93 points, or 1%,
to close at 27976.84, and the technology-heavy Nasdaq Composite
Index advanced 229.42 points, or 2.1%, to 11012.24, snapping a
three-session losing streak.
Shares of semiconductor companies and beaten-down energy stocks
led the way. Advanced Micro Devices surged 7.5%, while
ConocoPhillips gained 4.9% and Apple rose 3.3%, edging closer to a
$2 trillion market value.
The rally in the stock market has coincided with a rise in U.S.
government bond yields, a further sign that investors are growing
somewhat more optimistic about the economic outlook. Meanwhile,
gold prices have fallen this month and oil prices have climbed.
Some analysts and investors caution that the stock market is
susceptible to a reversal if virus cases begin to rise again or
future stimulus efforts disappoint. Others have pointed to
unpredictable trading behavior where stocks continually rise with
few fundamental drivers, much like during the dot-com boom.
"You have a lot of things that are very reminiscent of a
late-90s melt-up," said Chris Harvey, head of equity strategy at
Wells Fargo & Co. He said he doesn't expect the market to crash
but believes stock gains are likely to be muted in the next few
Investors are keeping a close eye on lawmakers' negotiations
over a new coronavirus-relief package for American households and
businesses. Senate Majority Leader Mitch McConnell said earlier in
the week that talks were "at a bit of a stalemate." Still, many
investors remain optimistic that a deal will be reached.
"Markets, particularly in the last day or so, seem to be pricing
in a stimulus even as lawmakers play down the odds," said Edward
Park, deputy chief investment officer at Brooks Macdonald, an
investment management firm.
Traders also said the market was supported by Democratic
presidential candidate Joe Biden's announcement that Kamala Harris
would be his running mate. Wall Street veterans widely consider Ms.
Harris to be a more moderate choice than others who were in
contention for a spot on the ticket.
The technology sector was the best performing group in the
S&P 500 Wednesday, jumping 2.3%. Microsoft shares added 2.9%,
and Tesla, which isn't in the index, rose 13% after the
electric-car maker late Tuesday said it would enact a 5-for-1 stock
While technology firms have been this year's star performers,
the market has been supported of late by stocks that are more
sensitive to the economy and had been hit particularly hard during
the pandemic's early days. The S&P 500 financial sector has
climbed 5% this month and the energy sector has risen 6.6%.
In bond markets, the yield on the benchmark 10-year Treasury
note gained for a fourth day, ticking up to 0.669%, from 0.657%
Tuesday and 0.541% a week earlier. The yield reached its highest
level since July 6.
Yields, which rise when bond prices fall, started climbing last
Friday after the Labor Department reported better-than-expected
jobs numbers for July. A series of large debt auctions have further
pressured the market, as has the decline in coronavirus cases and
the rally in stocks.
Bond yields tend to rise when investors feel better about the
economy, since faster growth can lead to inflation, which erodes
the purchasing power of bonds' fixed payments and can put pressure
on the Fed to raise interest rates. Fresh inflation data showed
that U.S. consumer prices increased by 0.6% in July, more than the
average expectation of 0.3%, according to FactSet.
Yields, notably, remain near historic lows and could have
difficulty rising much further, given the still murky economic
outlook and signals from Fed officials that they might hold off on
raising rates until inflation exceeds their 2% inflation target,
In the meantime, many analysts believe that low yields have
played a major role in propelling stocks back to their previous
highs, since they lower the cost of borrowing for businesses and
drive investors to buy riskier assets in search of returns.
Gold prices edged 0.1% higher, after the commodity on Tuesday
fell by the most since March. Analysts said appetite for gold has
been eroded this week by the rise in Treasury yields. The precious
metal -- usually viewed as a haven asset that investors flock to
when stocks are in tumult -- has climbed this year even as equities
Anna Isaac contributed to this article
Write to Ben Eisen at firstname.lastname@example.org and Sam Goldfarb at
(END) Dow Jones Newswires
August 12, 2020 18:03 ET (22:03 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.