The Nasdaq Composite set a record high for the close as markets rebound from their broad declines last week. Investors are turning their attention to the Jackson Hole symposium starting Thursday—a highlight of the year’s economic and central banking calendar.
The tech-heavy index gained 1.55% to 14,942.65, its 28th record close in 2021, bringing its year-to-date gain to nearly 16%. The S&P 500 and the Dow Jones Industrial Average gained as well, with respective surges of 0.6% and 0.85%. The 215.63-point rise in the Dow builds on a gain of 225 points on Friday as it started to bounce back from a 600-plus point decline over the previous days.
“A large part of the reason behind last week’s change in sentiment was increasing concerns over a slowing global economy, as well as increasing angst over rising infection rates and vaccine durability,” said Michael Hewson, an analyst at broker CMC Markets.
Economic data, therefore, is key for this week’s trading. The latest figures show growth, but not all readings beat estimates. The U.S. Manufacturing Purchasing Managers Index came in at 61.2, missing estimates for 62.5. The U.S. Services Purchasing Managers Index read 55.2, compared with the 59.5 economists expected. Both results showed an increase in activity.
Much of the miss on services activity was attributable to supply constraints, partly resulting from the Delta variant. “it is evident in today’s PMI that supply-side limitations remain binding for much of the economy,” writes Andrew Hollenhorst, Citigroup economist.
Existing-homes sales were 5.99 million, better than the expected 5.82 million.
Investors seemed to be buying following last week’s dip even before the data showed that the economy continues to rebound. Last week, the volatility of the market increased 20%, marking the seventh such surge since March 2020, according to Instinet. The market calmed following each of the first six spikes in volatility, and the majority of the time, the S&P 500 moved higher in the following weeks.
““Buy the dip” has underpinned the market all year and seems to be alive and well,” writes JJ Kinahan, chief market strategist at TD Ameritrade.
One belief enabling investors to have confidence in stocks is that the Delta variant’s impact on the economy may prove temporary. “While supply-side constraints may hold back production in the near term, some of this will be recouped as later stronger growth (potentially in 2022) as producers seek to satisfy backlogs and restock inventories,” Hollenhorst writes.
The action within the stock market also confirmed some degree of economic optimism. Stocks with earnings streams highly sensitive to economic demand — such as commodity producers — performed handsomely. The Energy Select Sector SPDR exchange-traded fund (XLE) rose 3.8% as the price of crude oil rose 5.3% to $65.46 a barrel. The SPDR S&P Metals & Mining ETF (XME) gained 3.7% as the price of copper rose 2.1% to $4.22 a pound.
Jackson Hole, which was intended as an in-person event but was changed to a virtual conference for the second year in a row, will be held Friday.
Federal Reserve Chair Jerome Powell is due to speak. Investors will closely follow his words for clues on when and how the Fed intends to begin scaling back the asset purchases it has used to support the economy during the pandemic.
Speculation about reducing, or tapering, the purchases has influenced investor sentiment in recent weeks, especially following the July meeting of the Federal Open Market Committee—the Fed’s monetary policy body.
“it’s unlikely that Powell will effectively pre-empt this [tapering] decision on Friday and he will instead wait until September to deliver a more substantive signal,” writes James McCann, deputy chief economist at Aberdeen Standard Investments.
There is some likelihood that comments made at the Jackson Hole meeting will indicate that the Delta variant has dissuaded the Fed from reducing its support for the economy, for now, writes Seaport Global Securities’ Tom Digaloma.
Others agree that tapering may have to wait until the current economic headwinds fade. “Making things even harder to figure out, the speech comes as Covid’s Delta variant creates new uncertainty in the U.S. and overseas,” writes Kinahan.
Crypto assets were also enjoying a boost. Bitcoin prices briefly traded above the $50,000 milestone Sunday night. It was the first time the cryptocurrency has passed that level since a crash in May.
Pfizer (PFE) stock gained 2.4% as the Food and Drug Administration fully approved its Covid-19 vaccine. The vaccine had received emergency-use authorization in 2020.
AMC Entertainment (AMC) rose 6.8. It was the highest-trending name on StockTwits, a website that tracks mentions of companies on Reddit.
PayPal (PYPL) stock rose 1.5% following news that the company will allow customers in the U.K. to buy and sell cryptocurrencies.
JD.Com (JD) stock rose 3.3%. The company reported higher results than expected for both revenue and earnings per share.
Corrections & Amplifications: The Federal Reserve’s Jackson Hole symposium will be held on Friday. An earlier version of this article incorrectly said it begins on Thursday.
Write to Jack Denton at firstname.lastname@example.org