After flirting with a new all-time high for the last number of weeks, the S&P 500 finally reached the much-anticipated new record high on Tuesday, eclipsing its previous peak set six months prior. The index has gained more than 50% since bottoming on March 23, 148 days ago. It took the S&P 500 about 2,000 days to eclipse 2007 highs after the financial crisis. Things happen faster these days, I guess. Positive economic indicators pushed markets higher this week with the July U.S home sales figures rising 9% from a year earlier and retail giants reporting better than expected Q2 earnings as online shopping sales offset the brick and mortar demise. This E-commerce adjustment was epitomized by Target, who saw their online sales jump a whopping 700% over the quarter. However, it wasn’t all good news as weekly unemployment claims climbed back above 1 million this week following last week’s 20-week low.
Despite the new high, more than half of the companies in the S&P 500 are down this year, and the average stock has dropped 4%. Technology led the way this week with Apple becoming the first-ever company to reach a Market Cap of over $2 trillion, a truly remarkable feat.
A rise in U.S. jobless claims and a dip in Treasury yields wasn’t enough to dampen the appeal of holding the greenback this week as the Dollar reclaimed some of its recent losses against the Euro.
0.64%US 10Y TREASURY YIELD
Treasuries yields slipped slightly this week following last week’s surge. Despite some positive inflation indicators over recent weeks, the cautious FED stance was reiterated this week as they remain prepared to extend further support to the U.S. economy.
Marginal moves in commodities this week. Oil prices held near a five-month high as an easing of coronavirus lockdowns has resulted in a slow recovery in fuel demand while major crude producers seek to limit supply.
On the vaccine front, Johnson & Johnson said it plans to test its experimental Covid-19 drug on 60,000 people in a phase 3 trial in September. Pfizer is also on track to submit their experimental Covid-19 treatment for review by regulators as early as October. Preliminary findings from these tests are expected by the end of 2020. Welcome news as multiple economies show signs of a faltering recovery.
Following an unstoppable rally in major technology shares last week, the same question remains for investors. Are all these Mega Caps completely overpriced and doomed to come crashing down, or could this just mean that the underperformers have more ground to make up? Like most things in life, the truth may well be somewhere in the middle.