U.S. stocks churned near record highs on Wednesday as the market gets set to close out a winning first half and second quarter of 2021.
The Dow Jones Industrial Average rose more than 100 points, boosted by strong days for Walmart and Boeing, while the S&P 500 perked up less than 0.1%. The Nasdaq 100 ticked down about 0.2%.
Wednesday is the last day of the second quarter and final day of the first half of 2021. Entering the session, the S&P 500 was up 14% year to date, while the Nasdaq Composite and the Dow have gained 12% apiece. For the quarter, the S&P 500 is up 8%. The S&P 500 and Nasdaq all posted fresh record closes on Tuesday.
The S&P 500 is headed for its fifth positive month in a row, rising 2.1% to 4,291.80 in June. The broad index is also on track for its best first half since 2019.
Investors have shrugged off high inflation readings and have kept buying stocks on the hopes an economic comeback from the pandemic would continue and the Federal Reserve would mostly maintain its easy policies. The three biggest winners in the Dow this year so far are Goldman Sachs, American Express and Walgreens Boots Alliance, all up more than 30%. Chevron, Microsoft and JPMorgan Chase are up more than 20% each. The tech and health care sectors of the S&P 500 both closed at records Tuesday.
The gains came as nearly 60% of U.S. adults have received a COVID-19 vaccine, allowing the economy to open back up at a rapid pace. Still, new variants of the virus have raised some concerns that more restrictions such as mask wearing would have to be reinstituted because the pace of vaccinations has slowed.
Investors have “a litany of reasons to stay constructive,” wrote Tom Lee, managing partner and head of research at Fundstrat Global Advisors, citing economic momentum, strong credit markets and possible fiscal stimulus.
Lee raised his S&P 500 target for 2021 to 4,600 from 4,300 in a note to clients Tuesday night. The new forecast represents a 7% gain from here.
Jeff Kilburg, the chief investment officer at Sanctuary Wealth, told CNBC that he is optimistic about the second half thanks to the continued commitment to the economic recovery from the Federal Reserve.
“We can fight all we want about inflation, and we can fight about which metric we utilize for inflation, but I think at the end of the day we really are seeing the commitment the Fed’s going to have,” Kilburg said, adding that the amount of investor cash on the sidelines should keep any minor pullbacks from becoming larger corrections.
Some investors and strategists have cited the spread of the Delta variant of Covid-19 as a risk for markets in the second half of the year. However, JPMorgan’s Marko Kolanovic said in a note to clients on Wednesday that the variant shouldn’t hurt equity markets, citing low fatality rates in countries with widespread vaccinations.
Good first halves for the market usually bode well for the rest of the year. Whenever there has been a double-digit gain in the first half, the Dow and S&P 500 have never ended that year with an annual decline, according to Refinitiv data going back to 1950.
One group that has helped the broad market reach its latest round of record highs is semiconductors, with the VanEck Semiconductor Index rising 6% since June 18 and more than 3% in the first two days of this week.
“Semis have bounced back in a big way, and over the last two trading days have finally broken the downtrend that has been in place since that mid-February peak. New highs and a broken downtrend? It’s been a big week for semis,” Bespoke Investment Group said in a note to clients.
Pending home sales jumped in May to their highest level since 2005. However, mortgage demand fell last week, the Mortgage Bankers Association said Wednesday, with high prices and low supply appearing to squeeze out some potential buyers. The readings came after a jump in home prices, reflected in the S&P CoreLogic Case-Shiller index, spurred homebuilder stocks higher on Tuesday.
Elsewhere, the Instituted for Supply Management’s Chicago purchasing managers index came in lower than expected for June but still showed expansion.
During the regular session Tuesday, stocks were little changed in light trading although the S&P 500 did notch its 4th straight positive session and an all-time high.
Stocks likely won’t see big movement until Friday’s jobs report gives a better idea of the state of the economy. Economists expect 683,000 jobs were added in June, according to a Dow Jones survey.
On Wednesday, payroll firm ADP reported that private payrolls rose 692,000 in June, beating expectations. However, the firm’s May number was revised down.
—CNBC’s Robert Hum contributed to this report.
