Stock market closed higher on Wednesday following a couple of bullish economic reports, even as the S&P 500 notched up a four-day winning streak. Markets digested the ongoing geopolitical tussle between North Korea and U.S. and also the fallout of Hurricane Harvey. Moreover, President Trump’s speech in Springfield regarding tax reforms boosted investor sentiment. Nasdaq outshone the other benchmarks due to a rally in tech and biotech shares. The Dow also finished in the green following gains from Caterpillar and Microsoft.
The Dow Jones Industrial Average (DJIA) closed at 21,892.43, gaining 0.1%. The S&P 500 Index (INX) increased 0.5% to close at 2,457.59. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,368.31, increasing 1%. A total of only around 5.12 billion shares were traded on Tuesday, lower than the last 20-session average of 5.84 billion shares. Advancing issues outnumbered decliners on the NYSE by 1.66-to-1 ratio. On the Nasdaq, advancers outnumbered decliners by a 1.69-to-1 ratio.
Strong Economic Data Overshadows Geopolitical Tensions
Stellar economic reports on Wednesday overshadowed the lingering political tensions between Pyongyang and Washington and the aftermath of Hurricane Harvey. The second estimate of the gross domestic product showed that the U.S. economy expanded by 3% during the second quarter 2017, whereas the consensus estimated it would grow by around 2.7%, notching its fastest rate of growth in more than two years. This was the result of increased consumer spending and business investment for the quarter.
Increase in consumer spending was pivotal in driving the GDP to 3% growth rate. Consumer expenditure was up 3.3% in the second quarter on account of increased expenditure on goods and services which also include car purchases. This is the best increase reported in a year. Moreover, business investment rose 0.6% in the second quarter. Also corporate adjusted pretax profits increased 6.7% over the past year.
Meanwhile, ADP released its employment report for August which showed that the private sector has added a total of 237,000 jobs to the U.S. during this month, significantly higher than the estimate of 185,000 job additions. This is the highest growth it experienced since March when a total of 255,000 jobs were added.
Such stellar economic data boosted investor sentiment, leading to broad based gains for the market. Consequently, analysts expect a rate hike by the Fed possibly in December due to strong economic results. Economists believe President Trump will bank on the current rate of economic growth to pay for his planned tax cuts and increase infrastructural spending.
Early on Tuesday, North Korea tested a missile over Japan, inviting criticism from across the world. This did little to deter the investors’ spirit as it was outdone by great economic reports. Trump tweeted on Wednesday: “The U.S. has been talking to North Korea, and paying them extortion money, for 25 years,” adding that “talking is not the answer!” Measured statements from leaders across the globe also added to gains for the market.
Also, Hurricane Harvey has halted more than 16% of the country’s total refining capacity sending gasoline futures higher and oil prices lower. This too failed to have an overall impact on the market due to splendid economic results.
Trump’s Tax Speech in Springfield
In a speech in Springfield, President Trump announced that he wanted the U.S. corporate tax rate to decline to 15%. Trump believes that this would create additional jobs and increase wages at the same time. Such comments boded well for the investors and markets gained following Trump’s speech. However, the administration has not laid out a detailed plan on tax reforms and has left it to Congress to take a decision on this issue.
S&P 500, Nasdaq Post Stellar Showing
The S&P 500 posted gains for the fourth straight session on Wednesday. Eight of its 11 main sectors finished higher. Such performance was achieved not only due to strong economic conditions but also due to a near 0.8% increase in the tech shares. The Technology Select Sector SPDR Fund (XLK) was up 0.7% after shares of Netflix (NFLX - Free Report) and Apple (AAPL - Free Report) increased 1.1% and 0.2% respectively. This was the S&P 500’s longest winning streak in last three months. Both the companies possess a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Nasdaq also gained on Wednesday, notching up 66.42 points and outshining other benchmarks. Such a showing was possible due to a rally in tech and biotech shares. Shares of Gilead SciencesInc. (GILD - Free Report) and BioMarin Pharmaceutical Inc. (BMRN - Free Report) notched up 7.3% and 5.6% respectively. The iShares Nasdaq Biotechnology ETF (IBB) gained 1.9% on Wednesday.
Stocks That Made Headlines
Chico's Falls on Earnings & Sales Miss, Guides Low
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Campbell Misses on Q4 Earnings & Sales, Stock Loses 5%
Campbell Soup Company(CPB - Free Report) posted fourth-quarter fiscal 2017 results, wherein both earnings and sales came below the Zacks Consensus Estimate, with sales marking its third straight miss. (Read More)
Five Below Q2 Earnings Top on Spinners Trend, View Up
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