On the last trading day of August, stock futures are pointing higher as markets look past downbeat economic news from China and continued COVID-19 contagion worries. It’s all part of a relentless march higher for stocks that barely paused this summer.
“The S&P 500 has posted at least 1 new closing high every week since the week of June 7, 2021, 13 weeks in a row. August 2021 has posted 12 new closing highs in the 21 trading days, with one day left to go,” noted Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.
“Year-to-date the index has posted 53 new closing highs, and is tied for the 4th highest in index history (from 1926),” added Silverblatt, who added that even if the market seems wacky, “if you’re not in it, you’re nuts, and most likely out of a job (keep your finger on the button).”
Our call of the day from UBS’s chief investment officer Mark Haefele, sees the S&P 500 is on a solid path to another big milestone — 5,000. That’s his end-2022 goal, while the bank sees the index reaching 4,600 by the end of this year.
“The S&P 500 has broken above 4,500 for the first time, taking gains for 2021 to over 20%. This might seem surprising given the recent run of negative news, including disappointing U.S. consumer data and a continual rise in COVID-19 infections. But we believe that the momentum toward reopening and recovery is intact and that there is further upside to equities,” Haefele told clients in a note.
He rattles off a list of supportive factors, including a fifth-straight quarter of robust results with more than 85% of companies beating second-quarter earnings and sales estimates; aggregate corporate profits up nearly 90% from year-ago levels; earnings nearly 30% higher than pre-pandemic levels; and revenue growth so robust it’s overwhelming cost pressures.
“We believe cost pressures for businesses should subside as supply begins to catch up. In addition, consumers’ balance sheets are at their strongest in decades due to the significant buildup in household savings over the past year, and retailers will continue to restock to keep up with demand,” said Haefele.
Show us the stocks? “With the economic recovery broadening, we expect cyclical sectors, including energy and financials, to take the lead,” he added.
Read: The S&P 500 hasn’t seen a year-to-date rally this strong since 1997. What’s next?
The chart
Thomas Lee, founder of Fundstrat Global Advisors, notes that history is on the side of a strong September when markets see an equally upbeat first half.
That’s even as investors worry about “overbought” markets due for a pullback and stats showing September returns since 1928 have been down about 0.1%. In a note to clients, Lee counters that seasonality factors change when a first half is strong — the first six months of 2021 saw a more than 13% gain, the 10th best since 1928.
That should mean a stronger September than expected and an intact “everything rally.” Here’s his chart:
Read: If you’ve got the stock market jitters, here are 20 companies in two defensive sectors
China’s delta drag and Moderna’s vaccine edge
Zoom Video ZM,
Robinhood HOOD,
Shares of Lightning eMotors ZEV,
China’s official nonmanufacturing purchasing managers index unexpectedly contracted in August, dragged by cooling service activity due to the Delta variant outbreak. The official gauge of factory activity also fell by more than expected as demand weakened.
Moderna’s MRNA,
The Centers for Disease Control and Prevention raised its COVID-19 travel advisory for Germany and bumped Switzerland, Guam, Saint Lucia, Puerto Rica and Guam among other spots to the highest level 4 warning. That Monday move came as the EU yanked the U.S. from its safe-travel list.
More than a million people are without power in Louisiana and Mississippi following Hurricane Ida, with officials warning it could be weeks before heavily damaged power grids could be repaired.
On the other side of the country, thousands fled California’s South Lake Tahoe resort on Monday in bumper-to-bumper traffic at times as the Caldor fire jumped highways.
Tuesday’s U.S. data includes the June Case-Shiller national home price index for June, the Chicago PMI and the consumer confidence index, both for August.
The markets
Ahead of the data, stock futures ES00,
Random reads
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Kid gate-crashes politician mom’s TV interview in New Zealand, waving a rude carrot.
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