Nasdaq and S&P 500 hit new highs with infrastructure deal

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A Volkswagen assembly line in Germany. Durable goods orders rose less than expected.

AFP via Getty Images

The Dow Jones Industrial Average soared and the S&P 500 and Nasdaq Composite hit record highs on Thursday.

Driving the action was a bipartisan deal in Washington on an infrastructure package. Investors less concerned about inflation didn’t hurt either.

The Dow Jones gained 0.95% to close at 34,196.82. the

S&P 500

rose 0.58% to a record 4,266.49 and the

Nasdaq composite

rose 0.69% to a record 14,369.71 points.

Prior to the announcement of the infrastructure deal, the Dow Jones tracked the Nasdaq. The package could provide a moderate boost to the economy and increase earnings on more economically sensitive value stocks, which dominate Dow industrials.

“The value seems to be benefiting the most from this news,” wrote Brian Price, head of investment management for Commonwealth Financial Network.

The deal could be worth around $ 1 trillion and could provide a new source of revenue for some construction companies and manufacturers. Construction company MasTec (MTZ), for example, saw its shares rise 3.5%. Martin Marietta Materials (MLM) grew 2.6%.

Other manufacturers have seen their stocks explode.

caterpillar

(CAT) and

Deere & Company

(DE) rose 2.5% and 0.8%, respectively.

This positive news made up for lackluster employment data. Initial claims for unemployment benefits stood at 411,000, a slight improvement from 412,000 last week and worse than estimates of 380,000.

The S&P 500 fell 0.1% on Wednesday when Atlanta Fed Chairman Raphael Bostic and Fed Governor Michelle Bowman said inflation could take longer than expected to subside.

The market, however, doesn’t seem so worried: Most stocks participated in the rally, suggesting widespread enthusiasm. About 77% of S&P 500 stocks were in the green, according to FactSet data.

Markets believe that “the Fed is not making mistakes, which reduces concerns about long-term growth prospects,” said Dennis DeBusschere, head of portfolio strategy research at Evercore. “This is why you are seeing a generalized increase [in stocks]. ”

Volatility is also falling, another sign of calm in the market. the

CBOE

The volatility index hit 15.92 and was as low as 14.19. That’s below the intraday low of February 19, 2020, the day the S&P 500 peaked before investors began to digest the onset of the pandemic. The volatility index has trended downward from a peak of 60 during a pandemic period at the end of March 2020.

Adding to the narrative that the Fed is not a threat to markets, New York Fed Chairman John Williams said on Thursday that rate hikes were still a long way off and inflation is expected to moderate next year. .

Durable goods orders rose 2.3% month over month in May, below the expected gain of 2.8%. “The increase in durable goods orders is a positive sign that supply constraints have not discouraged demand,” wrote Andrew Hollenhorst, economist at Citigroup.

In Asia, the

Nikkei 225

finished flat while the main indexes in Seoul and Hong Kong registered small gains.

the

Stoxx Europe 600

increased by 0.9%. The German Ifo business climate index hit its highest level for more than two years in June, and a French business climate index hit its highest level since 2007, data showed Thursday.

Among the individual actions,

Microsoft

(MSFT) was in the spotlight, as the software giant hosts a presentation of its Windows 11 operating system.

E-commerce platform

eBay

(EBAY) rose 1.5% after it announced the sale of an 80% stake in its South Korean unit to retailer E-mart for around $ 3 billion.

Shares of Darden Restaurants (DRI) rose 3.3%. The company reported earnings of $ 2.03 per share, beating expectations of $ 1.79 per share, on revenue of $ 2.28 billion. Wall Street expected sales of $ 2.19 billion.

MGM Resorts International (MGM) stock gained 2.3% after being upgraded to Buy from Hold at Deutsche Bank.

Seagate Technology (STX) stock gained 1.9% following an upgrade to Outperform from Market Perform at Northland Capital.

Credit Suisse (CS) shares gained 3.8%. Berenberg lifted his call to action to buy from detention.

Dollar Tree (DLTR) stock fell 2.1% after being downgraded to Neutral from the overweight position at Piper Sandler.

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