NEW YORK, April 15 (Reuters) – U.S. stock indexes returned to new highs on Wednesday, putting fears of economic disruption driven by the war with Iran in the rearview mirror.
The S&P 500 rose 0.8% on Wednesday to notch its first closing high since January 27, reversing a pullback that last month briefly put the broadest U.S. stock market gauge close to confirming a correction marking a 10% decline from a recent high. The Nasdaq rose 1.6% to hit its first high since October 29, as the return of market risk taking drove fresh gains in tech stocks. Both indexes hit intraday records as well on Wednesday.
Investors said the rally in recent weeks reflects in part the expectation that the Trump administration and Iran will find a way to end hostilities that initially rattled markets and still threaten global economic growth by spurring a sharp rise in energy prices and putting central banks on watch for a fresh wave of inflation. Meanwhile, first-quarter earnings season is under way this week, with mostly positive results helping to fuel U.S. index gains.
Wednesday’s closing level of 7,022.95 on the S&P 500 surpassed the previous record of 6,978.6. The Nasdaq Composite Index closed at 24,016.02, beating its Oct. 29 closing high of 23,958.47.
COMMENTS:
OLIVER PURSCHE, SENIOR VICE PRESIDENT, ADVISOR, WEALTHSPIRE ADVISORS, WESTPORT, CONNECTICUT:
“There are three key drivers to market performance: strong corporate earnings, better than forecast inflation data (and) a general belief that a deal between the U.S. and Iran is going to happen. Moreover, pessimism amongst investors is still high, which is considered a reliable contrarian sign by many.
“To us, the most critical things are overall economic data (i.e. inflation, employment, GDP growth), and corporate earnings – as long as these remain robust, markets will largely ignore distractions. Apparently, market participants agree.”
BURNS MCKINNEY, PORTFOLIO MANAGER, NFJ INVESTMENT GROUP, DALLAS:
“I do not place much significance on the technical level that it is surpassing. However, I do think that is emblematic of the fact that investors appear overly optimistic on the war outcomes and are not pricing in downside risk.”
ADAM SARHAN, CHIEF EXECUTIVE, 50 PARK INVESTMENTS, NEW YORK:
“The market is a forward-looking mechanism and appears to be discounting the war ending swiftly. There’s an old adage on Wall Street that says ‘buy the rumor and sell the news.’ There’s a very high likelihood that phenomenon is happening now. A lot of people were leaning bearish two weeks ago, and a lot of those shorts are being squeezed.
“The market is exceptionally strong and looks like it wants to go higher from here, barring some unforeseen event. Even at the end of March, when the market was down, it was only a few percentage points below an all-time high. The inability to fall in a meaningful fashion speaks volumes and illustrates how strong the market is right now. Until we see any heavy selling show up, the market has earned the bullish benefit of the doubt.”
MARK HACKETT, CHIEF MARKET STRATEGIST, NATIONWIDE INVESTMENT MANAGEMENT GROUP, PHILADELPHIA:
“We have been in a long trading range, mostly between 6,600-7,000 since September, with the brief dip below in March. Historically, breakouts from extended bases are powerful, as those waiting on the sidelines move as a herd. This is particularly true when extreme pessimism exists, as the pendulum turns quickly.”
CHUCK CARLSON, CHIEF EXECUTIVE OFFICER, HORIZON INVESTMENT SERVICES, HAMMOND, INDIANA:
“We had been viewing the pullback as a correction within an ongoing bull market. History has shown that it’s not a great idea to really bail on the market because of war news. Most corrections within bull markets have some sort of catalyst for them, and obviously the war and the spike in oil prices tended to be a catalyst, but the market, after the shakeout, seems to be viewing things as temporary. And I think there has been more of a focus back on the resiliency of the economy and the expected strength in corporate profits. And I think that’s what is helping.
“A lot of the stocks during a correction really get beaten up, especially in the tech sector. And so there was a restoration of values out there that I think has drawn investors back into certain stocks. And that has been largely focused in tech. That has been a pretty good area here on this rebound.”
TIM HOLLAND, CHIEF INVESTMENT OFFICER, ORION, OMAHA, NEBRASKA:“What does the stock market know that maybe we investors don’t? Based on the S&P 500’s run to an all-time high on April 15th, and WTI dropping from $112 to $91, it might be that the war in the Middle East will be winding down soon and the outcome might be more structurally bullish for the global economy than expected, and by that we mean the Strait of Hormuz will not be solely under Iranian control going forward – that is pure speculation on our part, but a point we think worth considering.
“The near 10% drop in the S&P 500 a few weeks back reset valuation and sentiment and set the stage for stocks to find their footing and rebound higher. Big bank earnings have surprised largely to the upside, with most CEOs calling out the strength of the U.S. consumer, welcome commentary given our consumer sentiment surveys, and concerns that higher prices at the pump might weigh on spending.”
(Reporting by Caroline Valetkevitch, Sinead Carew, Lewis Krauskopf, Saqib Ahmed, Laura Matthews; editing by Colin Barr)
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