Stocks and index ETFs are mixed to slightly higher in early Thursday trading, as the market consolidates in an attempt to maintain February’s drive.
The Dow Jones Industrial Average is trading near breakeven, and the S&P 500 added 0.2%, within spitting distance of its all-time highs. The tech sector is helping to sustain stocks, with the Nasdaq Composite trading 0.52% higher.
Major stock ETFs are gaining marginally on Thursday as well. The SPDR Dow Jones Industrial Average ETF (DIA), SPDR S&P 500 ETF Trust (SPY), and Invesco QQQ Trust (QQQ) are all slightly up just after 11:45 AM EST.
After a healthy rally in stocks to start the month, the market has taken a breather, moving sideways over the last few days. While the Dow moved up slightly Wednesday, taking its monthly wins to nearly 5%, the S&P 500 and the Nasdaq dropped in the same trading session, giving analysts reason to look for something additional to drive stocks higher.
“We pulled a lot of optimism forward, and the market is trying to figure out where we go from here,” said Gregory Faranello, head of U.S. rates trading at AmeriVet Securities. “The fiscal and monetary side of the equation seems priced into the market. Going forward, we need to see a broader economic recovery, a broader reopening and a broader dissemination of the vaccine.”
Nevertheless, the trend is still higher, with stocks climbing to record levels as investors continue to expect additional fiscal relief to bolster the market. The Russell 2000 has seen small caps surge 15% this year, helping ETFs like the Principal U.S. Small-Cap Multi-Factor Index ETF (NASDAQ: PSC) to shine.
“We are in this melt-up environment where if there’s not a big negative headline, it seems every day the market just grinds a little bit higher,” said Ross Mayfield, investment strategy analyst at Baird.
Another factor supporting stocks is the corporate earnings season. Of the S&P 500 components that have reported earnings thus far, over 80% have beaten analysts’ expectations.
The number of coronavirus cases has also fallen over the last ten days, according to data from John’s Hopkins. Sunday and Monday saw two days so far this year where the number of new infections fell below 100,000. It comes amid roughly a month of declining daily cases after the U.S.
“We are continuing to watch these data closely, and although hospital admissions and cases are consistently dropping, I’m asking everyone to please keep your guard up. The continued proliferation of variants remains of great concern and is a threat that could reverse the recent positive trends we are seeing,” the Centers for Disease Control and Prevention Director Rochelle Walensky said Monday at a press conference.
Meanwhile, while new claims for jobless benefits came in at 793,000 last week, worse than an estimate of 760,000 from economists polled by Dow Jones, Federal Reserve Chairman Jerome Powell said Wednesday that the economy faces issues in the labor market, and so monetary policy is likely to remain ‘patiently accommodative’. Powell’s comments are also supportive for stocks.
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