By Sunny Oh, and Andrea Riquier
Stock-market benchmarks swept to fresh highs on Monday on another round of good economic news from the services sector, adding to the array of indicators showing improving activity, including a stellar March jobs report from last Friday.
Most markets were closed in Europe in observance of Easter Monday.
U.S. investors returned from a three-day weekend that saw cash trading in equities — and most other markets — closed in observance of the Good Friday holiday and trading in equity futures closed at 9:15 a.m. Eastern on Friday, about 45 minutes after the release of the labor-market report.
How did stock benchmarks perform?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.66% rose 373.98 points, or 1.1%, to close at 33,527.19, passing its previous record of 33,171.37 hit on March 9.
The S&P 500 /zigman2/quotes/210599714/realtime SPX +0.74% added 58.04 points or 1.4%, to end at 4,077.91, also a new record.
The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.88% surged 225.49 points, or 1.7%, to close at 13,705.59.
On Thursday , the Dow rose 171.66 points, or 0.5%, to 33,153.21, the S&P 500 gained 46.98 points or 1.2%, to 4,019.87, while the Nasdaq Composite Index added 233.23 points, or 1.8%, to 13,480.11.
What drove the market?
Investors were wading through a swell of good economic news. Job growth accelerated in March on the back of gains in restaurants and other businesses, marking the best report from the Labor Department in seven months as the U.S. added 916,000 new jobs and the unemployment rate fell to 6% from 6.2%.
On Monday, the Institute for Supply Management said its services index jumped to 63.7% in March, its highest since 1997, from 55.3%. Any reading above 50% represents an expansion in economic activity.
The data “affirm that we’re about to see some of the strongest data we’ve ever seen,” said Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors. “If there were any doubts out there, the jobs report last week put that to rest.”
That means there’s still more upside for the rotation into value stocks, Geisdorf told MarketWatch. The tech-heavy Nasdaq was rallying Monday, as investors gauged the selloff in bellwether stocks like Apple Inc. /zigman2/quotes/202934861/composite AAPL +0.53% and Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN -0.45% to be overdone. Still, if corporate taxes do go up, “healthcare is vulnerable and tech is in the crosshairs,” he said.
The rebound in stocks over the past few weeks has been impressive, Geisdorf said. “There’s been strong breadth across the board. There’s room for stocks and rates to go higher together but a dramatic run-up in rates could derail the market in the short term.”
The services sector has felt the brunt of the damage from pandemic lockdowns and social-distancing protocols intended to limit the spread of the deadly disease. The sharp rebound in activity among banks, retailers and other service providers at the start of the year underlines the boost from vaccines that are helping efforts to reopen the economy.
However, the prospect of a sharp economic recovery, powered by a $1.9 trillion COVID aid package, with President Joe Biden also backing a $2.3 trillion infrastructure program, has also stoked worries that the economy may overheat and compel the Federal Reserve to raise interest rates sooner than initial projections for 2023 or 2024.
Equities may face some headwinds as the prospect of higher corporate taxes shadows investors. Treasury Secretary Janet Yellen called for a global minimum corporate tax as she supports the Biden administration’s efforts to finance its infrastructure plan. The Biden plan calls for lifting the corporate tax rate from 21% to 28% and increased taxes on foreign earnings by companies.