Major U.S. stock indexes closed higher Tuesday, ending near or above prior all-time records, as upbeat economic reports and dovish tones from the Fed helped feed the buying momentum on Wall Street.
The ascent for stocks comes despite expectations for a seasonally challenging month for equities, following the best August returns in more than 30 years.
How did stock benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.35% rose 215.61 points to end at 28,645.66, or 0.8% higher, the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.22% added 26.34 points to close at a record 3,526.65, a gain of 0.8%, after setting an intraday record of 3,528.03; while the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.28% advanced 165.21 points to a record 11,939.67 finish, a rise of 1.1%, after touching a new intraday all-time high of 11,945.72.
On Monday, the Dow shed 223.82 points, or 0.8%, to end at 28,430.05. The S&P 500 fell 7.70 points, or 0.2%, ending at 3,500.31. The Nasdaq rose 79.82 points, 0.7%, to end at a record 11,775.46, its 41st record close of 2020.
The S&P 500 clinched its best August return since 1986 and the Dow its best return for that month since 1984, while the Nasdaq recorded its strongest August since 2000.
What drove the market?
The winners of the past few months are looking to lead the next one, as September kicks off with further buying of large-capitalization growth and technology stocks, a major trading theme since March when the coronavirus pandemic took hold.
Gains in Apple , Walmart , Zoom Video , Amazon.com /zigman2/quotes/210331248/composite AMZN -1.00% and Facebook Inc. /zigman2/quotes/205064656/composite FB +4.17% underscored that theme Tuesday, with shares in those popular plays carving out fresh gains in the new month.
“I prefer to call them stay-at-home stocks, because really they are the COVID winners,” said Stephen Dover, head of equities at Franklin Templeton, in an interview with MarketWatch.
“Those are all beating the reopening stocks, including the airlines,” he said, pointing to the recent decision by major carriers to drop their fees on most tickets changes for domestic flights. “In essence, they can take that straight off their bottom line,” Dover said.
U.S. stocks initially got off to a choppy start Tuesday, but gained steam throughout the session, including after Federal Reserve Governor Lael Brainard said the central bank should “pivot” to provide more support for U.S. economic growth, presumably meaning the Fed could purchase more assets, such as U.S. Treasurys or privately issued debt.
The jolt higher comes against a backdrop of elevated stock valuations, worries about a potential pullback in risk asset prices, but also with the Fed implying it will keep interest rates ultra-low, even if inflation pressures begin to percolate.