S&P 500 hits sixth-straight record, Dow adds 100 points as Wall Street kicks off the second half

The S&P 500 rose on Thursday and hit another record high as Wall Street kicked off the second half of 2021 on a positive note.

The benchmark index rose 0.5% and notched its sixth-straight record close, settling above 4,300 for the first time at 4,319.94. The Dow Jones Industrial Average was higher by 131 points to close at 34,633.53, while the tech-heavy Nasdaq Composite ticked up about 0.1% to 14,522.38.

The rise for stocks was widespread, with energy stocks leading the way as West Texas Intermediate crude rose above $75 per barrel. Shares of Chevron rose 1.4%, making the stock one of the best performers in the Dow.

Apparel company Nike was another winner, rising more than 2%. However, shares of Walgreen Boots Alliance fell more than 7% despite releasing a better-than-expected earnings report, weighing on the 30-stock average.

A stretch of strong economic news continued on Thursday as weekly initial jobless claims came in at 364,000, setting a pandemic-era low. Additionally, the Institute for Supply Management’s June manufacturing index showed an expansion that was roughly in line with expectations, and the Congressional Budget Office hiked its estimates for economic growth.

Those data points build on a first half of the year that saw the U.S. economy recover rapidly as vaccines became widespread and businesses reopened, helping the S&P 500 rise by more than 14% and the Dow and Nasdaq also posting double-digit percentage gains.

“Better news on Covid, vaccinations, re-openings, economic growth, and earnings fueled the advance.  Nearly equal gains were achieved in both quarters by a rotation in leadership allowing broad participation,” said Jim Paulsen, Leuthold Group chief investment strategist.

The small cap Russell 2000 rose more than 17% in the first six months of the year amid a strong rotation into value stocks as the economy reopens from the Covid-19 pandemic. However, smaller companies and value stocks appeared to lose momentum in recent weeks while Big Tech stocks regained their footing.

Brent Schutte, chief investment strategist at Northwestern Mutual, said that he expected that reversal to prove temporary as the economic recovery continues.

“I think the inflation fears have kind of weighed in and had investors thinking that we may be further along in the cycle than I think we actually are. … I still think you have enough economic momentum that growth is going to stay strong, perhaps at a plateau, for the next year, which for me means you still want to be invested in things where earnings growth is more cyclical in nature,” Schutte said.

Similarly, Paulsen said that the path of inflation and economic growth should determine market leadership in the second half.

“If inflation fears do calm further and bond yields remain lower for longer, expect growth and technology stocks to continue leading the stock market higher. However, should strong economic growth aggravate inflationary worries and again force bond yields higher, correction fears may intensify, and leadership should be centered among cyclical stock sectors, smaller cap stocks and even international stocks,” Paulsen said.

The most anticipated piece of economic news this week is Friday’s monthly jobs report. Economists expect 683,000 jobs were added in June, according to a Dow Jones survey.

Thursday’s moves come after Wall Street wrapped a solid first six months of the year in the previous session.

Strong first halves for the stock market historically bode well for the remainder 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.

When the S&P 500 is up more than 12.5% to start the year, the second half has a median gain of 9.7%, according to LPL Financial data going back to the 1950s.