U.S. equities and stock exchange traded funds continued to strengthen Thursday as upbeat economic data lifted major indices.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEARCA: SPY), iShares Core S&P 500 ETF (NYSEARCA: IVV) and Vanguard 500 Index (NYSEARCA: VOO), were up 0.4% Thursday.
U.S. markets were supported by data showing consumer spending, which makes up over two-thirds of U.S. economic activity, rose 0.3% last month after a 0.2% gain in June, Reuters reports. The consumer data follows a day after data revealed the economy expanded at its fastest clip in over two years.
Global markets also strengthened after China revealed factory growth unexpectedly quickened in August.
“The outlook for the U.S. and the global economy, remains relatively positive and most investors do not see a recession ahead,” Michael Sheldon, chief investment officer of RDM Financial Group at HighTower, told Reuters. “Given that backdrop, equity markets are likely to grind higher over the next few quarters and pullbacks are likely to be bought by investors.”
Further adding to the market momentum, Treasury Secretary Steven Mnuchin said President Donald Trump’s administration has a plan in place on tax reform and is still on track to implement the agenda by year’s end. Mnuchin’s reassuring remarks come after Trump’s speech Wednesday when the president reiterated his longstanding call for cutting U.S. corporate tax rates to 15% from the current 35%.
Investors will be closely watching for the comprehensive monthly jobs report on Friday, which could provide a clearer direction on the labor market and how the Federal Reserve could act on the news.
Some are already questioning the Fed’s monetary policy outlook after the core personal consumption expenditures price index – the Fed’s preferred inflation measure – rose 1.4% in the 12 months ended July, its smallest year-over-year gain since the end of 2015.
“The fact that inflation remains below the Fed’s 2 percent goal makes it tougher for (the Fed) to raise rates in the fourth quarter,” Sheldon said.
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