The S&P 500 broke above its last major high set over the summer, hitting a record high of nearly 3043 on Monday, as investors were encouraged by robust earnings and what appears to be progress on U.S.-China trade.
The S&P 500 rose 0.6% to trade above the 3,027.98 record set on July 26. Meanwhile the other indices followed suit with the Dow Jones Industrial Average gaining 0.4% and the Nasdaq Composite climbing 0.9%.
President Donald Trump was elated, and tweeted that the move to record highs was a “big win for jobs, 401-K’s, and, frankly, EVERYONE.”
The S&P just hit an ALL TIME HIGH. This is a big win for jobs, 401-K’s, and, frankly, EVERYONE! Our Country is doing great. Even killed long sought ISIS murderer, Al-Baghdadi. We are stronger than ever before, with GREAT upward potential. Enjoy!
— Donald J. Trump (@realDonaldTrump) October 28, 2019
Trepidation over a global economic recession, the ongoing trade war, and Brexit, have kept the market down, resulting in wide vacillations in price action since summertime. As a result, the S&P 500 struggled through September but has rebounded strongly in October after a consolidation period over the last couple of weeks. It is now up over 6% from that August low.
Many analysts were naysayers, believing that the confluence of news events would prevent a new high from being formed this quickly.
“It is incredible because if you told me three weeks ago–three weeks ago there were people who were saying listen, when we get into earnings season, and it was right before the banks– we’re going to be sorely disappointed. What’s going to happen is the banks are going to lead us down because of the yield curve, the industrials are going to lead us down because of China, we’re going to have healthcare go down because of Elizabeth Warren, we’re going to have technology go down because it’s been routed to high. Everyone of those these has been either rebutted or frankly to the point where it’s standing on its head,” said Jim Cramer on CNBC.
Last week’s 1.2% rally cleared the way for a potential S&P 500 upside breakout, said Craig Johnson, chief market technician at Piper Jaffray.
“The technical backdrop improved last week as the SPX finally distanced itself from the magnetic 3,000-point level,” Johnson said. “A close above 3,026 will validate a record high breakout and likely open the door to a new leg higher.”
Better-than-expected earnings have also helped stocks to rally higher, as 78% of the 206 companies of the S&P 500 that have reported earnings have beat analyst expectations, according to FactSet.
“The US equity markets have been surprised by the strength of the 3Q results,” said Sean Darby, global equity strategist at Jefferies, in a note. “With the US earnings season producing a positive string of results and investors positioning extremely risk averse alongside negative US real interest rates, we believe there is further upside for global equities.”
To take advantage of breakouts if stocks are poised for more gains, traders can use leveraged S&P 500 ETFs, such as the Direxion Daily S&P 500 Bull 2X ETF (NYSEArca: SPUU) or the Direxion Daily S&P500 Bull 3X ETF (NYSEArca: SPXL).
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