Stocks closed higher Thursday on Wall Street, helped by strong company earnings as well as optimism that Washington can reach a deal for another round of fiscal stimulus for the millions of Americans who need it.
The S&P 500 rose 1.1%, a record. A measure of small-company stocks rose twice as much, a bullish signal that investors are feeling more optimistic about the economy.
All three major U.S. indexes are on pace for weekly gains above 3%, an encouraging start to February after a late fade in January. Treasury yields continued to move higher, another sign of optimism about the economy.
“The path of least resistance seems to be higher,” said Brian Price, head of investment management for Commonwealth Financial Network. “We had a few minor pullbacks since the start of the year, but it really seems an extension of what we saw in the fourth quarter where it seems the market is anticipating lockdowns ending, people going back to work and economies broadly opening.”
Wall Street continues to be focused on individual company earnings. Shares of eBay rose 5.5% and PayPal climbed 6.7% after both companies reported results that blew away Wall Street’s expectations.
This will continue to be a busy week for earnings for investors. Ford Motor Co. will report after the closing bell, along with Gilead Sciences, News Corp. and Wynn Resorts.
“We’re really impressed with how corporate America has come through earnings season so far,” said Jeff Buchbinder, equity strategist at LPL Financial.
The performance so far is a surprising and welcome about-face from early projections for weak profits. Tech companies are doing particularly well, but financial and smaller companies are also releasing surprisingly good results, he said.
Analysts were expecting an earnings contraction of about 13% heading into the latest round of quarterly reports, according to FactSet. With about half of companies reporting, the S&P 500 is now showing earnings growth of just under 1% and estimates for both the next quarter and all of 2021 are improving.
Shares of the beaten-down companies that have been of intense interest by retail investors were down again. GameStop slid 39%, continuing its sharp pace downward following its meteoric rise over the previous two weeks. At about $56.80 a share, it’s still far above the $17 price it fetched at the beginning of the year. It traded as high as $483 last Thursday. AMC Entertainment was down 20.7%.
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