The S&P 500 and Nasdaq closed at record highs on Thursday, propelled by optimism about more pandemic relief under the Biden administration to support the economy after data showed a tepid labour market recovery.
Investors in the Canadian benchmark index weren’t quite as lucky, with the heavyweight energy and financial sectors on the decline. The S&P/TSX Composite Index closed down 98.71 points, or 0.55%, at 17,916.20.
The number of Americans filing new applications for unemployment benefits dipped to 900,000 last week but still remained stubbornly high as the COVID-19 pandemic tears through the nation, raising the risk that the economy will shed jobs for a second straight month in January.
But other data showed the housing and manufacturing sectors as areas of strength to help buttress the economy.
“We’ve had a very strong momentum going into this year and coming into the Biden administration... because of prospects of a bigger stimulus check and more spending in general,” said Mohannad Aama, managing director at Beam Capital Management LLC in New York.
Unofficially, the Dow Jones Industrial Average fell 12.37 points, or 0.04%, to 31,176.01, the S&P 500 gained 1.23 points, or 0.03%, to 3,853.08 and the Nasdaq Composite added 73.67 points, or 0.55%, to 13,530.92.
The Nasdaq Composite advanced, boosted by a jump in shares of megacap stocks such as Alphabet Inc, Apple Inc and Amazon.com Inc ahead of their earnings reports in the coming weeks.
It follows Netflix Inc’s blowout results on Wednesday that revitalized the “stay-at-home” beneficiaries, adding $262 billion in overall market capitalization to the FAANG group of stocks.
“Given the possible surge in COVID cases, investors are going to go back to the old playbook that worked well at similar times last year... (The) technology sector is performing well and (so is) anything related to working from home,” Aama added.
In a reversal of the trend earlier this month, the Russell 1000 growth index, which includes technology stocks, is this week far outperforming the Russell 1000 value index, which is heavily comprised of cyclical stocks such as financials and energy.
President Joe Biden has launched several initiatives during his initial days in office, including ramping up testing and vaccine rollouts.
Technology, consumer discretionary and communication services which includes Alphabet and Facebook, were the only S&P sectors in green.
Energy was the biggest drag among 11 major S&P sectors, following news Biden revoked the Keystone XL oil pipeline project’s presidential permit.
With valuations near a 20-year high, corporate results could present an important test of whether the stock market rally has run ahead of fundamentals.
Earnings at S&P 500 companies are expected to rise by 24% in 2021 after falling 15% in 2020, according to Refinitiv data as of Jan. 15.
In Canada, financials dipped about half a percentage point, while energy slipped 0.73%.
Oil prices steadied after industry data showed a surprise increase in U.S. crude inventories that revived pandemic-related fuel demand concerns, while U.S. stimulus hopes buoyed prices.
Brent crude futures rose 2 cents to settle at $56.10 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 18 cents to settle at $53.13 a barrel.
Both benchmarks rose over the past two days on expectations of massive COVID-19 relief spending under new U.S. President Joe Biden.
Late Wednesday, industry data showed U.S. crude oil inventories rose 2.6 million barrels last week, compared with analysts’ forecasts in a Reuters poll for a 1.2 million-barrel draw.
Read more: Stocks that saw action Thursday - and why
Reuters, Globe staff
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