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Aug. 5, 2021, 4:52 p.m. EDT

S&P 500, Nasdaq close at records and Dow retakes 35,000 as value, tech stocks rally in tandem

By William Watts and Steve Goldstein

The S&P 500 index and the Nasdaq Composite ended at records Thursday as shares sensitive to economic recovery and technology stocks both rose while investors positioned for the monthly jobs report on Friday that will help shape views on how long the Federal Reserve’s bond-buying program will continue.

What’s happened

  • The Dow Jones Industrial Average (DOW:DJIA) rose 271.58 points, or 0.78%, to finish at 35,064.25

  • The S&P 500 (S&P:SPX) gained 26.44 points, or 0.6%, to close at 4,429.10.

  • The Nasdaq Composite (NASDAQ:COMP) advanced 114.58 points, or 0.8%, to end at 14,895.12

  •  The small-capitalization Russell 2000 index (USA:RUT)  rose 39.69 points or 1.8% to 2,236.01

What’s drove the market?

Stocks maintained a positive tone Thursday after data showed first-time claims for unemployment benefits last week fell to 385,000, down 14,000 from the previous week and in line with forecasts, while continuing claims fell below 3 million for the first time since March 2020. Separately, the June U.S. international trade deficit rose to a record , fueled by a surge in imports.

Investors began positioning ahead of the nonfarm payrolls report for July due Friday. Economists polled by The Wall Street Journal expect 845,000 nonfarm jobs were created in July.

Steve Englander, head of global G-10 currency research and North America macro strategy at Standard Chartered, said a Friday payrolls report close to the current consensus could generate a market reaction even without a surprise, as it could firm up interest-rate expectations.

Positive assumptions — including 2021 gross domestic product growth of better than 6%, followed by a 4.5%-plus GDP gain in 2022, along with recent all-time highs for the major equity benchmarks, driven by increasing second-quarter earnings growth and upward revisions to third-quarter and fourth-quarter forecasts, plus a drop in the 10-year yield recently that has reignited interest in growth stocks and reacquainted income-oriented investors with higher-yielding sectors — all continue to outweigh negative assumptions, said Sam Stovall, chief investment strategist at CFRA, in a note.

Negative assumptions include the possible year-end or later start to the tapering of the Fed’s bond-buying program and a late-2022 or early-2023 liftoff on official interest rates, a surge in COVID-19 delta variant cases, waning market breadth and uncertainty over an infrastructure package.

“Though a pullback or correction appears increasingly likely, we think investors should look upon possible price weakness as an opportunity to buy, rather than a reason to bail,” Stovall wrote.

Analysts at Goldman Sachs boosted their year-end S&P 500 price target to 4,700 from 4,300. “Relative to consensus, we expect stronger revenue growth and more pretax profit margin expansion as firms successfully manage costs and as high-margin tech companies become a larger share of the index,” they said.

Meanwhile, the rise in the international trade deficit was viewed as a positive, with imports underlining the strength of the U.S. economy in June.

“Looking ahead, we expect the deficit will start to narrow as trade flows rotate away from imports and towards exports as domestic consumption slows and growth abroad accelerates,” wrote economists at Oxford Economics, in a note. “However, deteriorating health conditions could distort trade further if virus restrictions are reimposed and recoveries stall.”

The Biden administration won a voluntary commitment from the auto industry that electric vehicles would comprise up to half of U.S. sales by the end of the decade.

“All the major automakers rallied but if the new guidelines aimed at 2026 are too aggressive that may weigh on some manufacturers” wrote OANDA senior market analyst Edward Moya. “Electric vehicles for the masses should excite Tesla (NAS:TSLA) , NIO (NYS:NIO) , XPeng (NYS:XPEV) , and Lucid Motor (NAS:LCID) shareholders. 

Which companies were in focus?

  • Robinhood Markets Inc. (NAS:HOOD) shares were down 12% following the online brokerage’s 50% surge on Wednesday. Robinhood on Thursday filed to sell up to 97.9 million Class A shares over time . The sales will be made by selling shareholders upon the conversion of certain convertible bonds held in connection with the IPO and the company will not receive any proceedings.

  • Shares of Veoneer Inc. (NYS:VNE) jumped 23%, after Qualcomm Inc. (NAS:QCOM) announced that it had offered to buy automotive safety electronics company for $37 a share, which is 18% above the Magna International Inc.’s (NYS:MGA) already agreed-upon buyout bid of $31.25 . Qualcomm shares were down 1.4%, while Magna shares rose 1.9%.

  • Moderna Inc. (NAS:MRNA) said Thursday that its COVID-19 vaccine is 93% efficacious six months after the second dose as part of its  second-quarter earnings announcement . Shares were up 0.1%, after soaring 20.9% the past two days to close at a record $419.05 on Wednesday.

  • Uber Technologies Inc. (NYS:UBER) shares rose 6.3% after reporting worse margins than forecast.

  • Shares of cloud-software company Fastly Inc. (NYS:FSLY) fell 17% after the company reported the financial impact of an outage.

  • Etsy Inc. (NAS:ETSY) shares dropped 6.2% after the online arts marketplace had fewer active buyers than expected.

What did other markets doing?

  • The yield on the 10-year Treasury note (XTUP:BX:TMUBMUSD10Y) rose more than 4 basis points to close at 1.217%. Yields and debt prices move in opposite directions.

  • The ICE U.S. Dollar Index (IFUS:DXY) , a measure of the currency against a basket of six major rivals, fell 0.1%.

  • Oil futures (NYM:CL00) ended 1.4% higher, breaking a three-day losing streak , while gold futures (NYM:GC00) closed with a loss of 0.3%.

  • In European equities, the Stoxx Europe 600 (STOXX:XX:SXXP) rose 0.4%, while London’s FTSE 100 (FTSE:UK:UKX) ended with a loss of less than 0.1%.

  • In Asia, the Shanghai Composite (SHG:CN:SHCOMP) fell 0.3% and the Hang Seng Index (HONG:HK:HSI) dropped 0.8%, while Japan’s Nikkei 225 (NIKKEI:JP:NIK) rose 0.5%.

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