Ending a choppy session that initially pulled markets into negative territory, the S&P 500 closed at a new record high Tuesday after monthly economic data alleviated concerns over rising inflation while a string of strong corporate earnings fueled optimism over the economic recovery.
The S&P 500 ticked up 36 points, or 0.8%, on Tuesday to close at 4,423 points, beating out its last record close on July 26 and pushing gains this year to nearly 20%.
Meanwhile, the Dow Jones Industrial Average and tech-heavy Nasdaq, which are both up about 16% this year, climbed 0.8% and 0.6% to 35,117 and 14,761 points, respectively, ending the day within 1% of their latest highs last month.
Reversing early losses, stocks started to surge after new U.S. factory data at 10 a.m. EDT showed a stronger-than-expected uptick in orders last month that Oanda Senior Market Analyst Ed Moya says “suggests manufacturers are getting their hands on supplies” and should therefore support the Federal Reserve’s argument that recent inflation is only transitory, or temporary.
Heading up gains in the S&P, a trio of companies—information technology giant Gartner, energy firm Pioneer Natural Resources and apparel-maker Under Armour—soared as much as 11% after posting better-than-expected earnings since Monday’s market close, tacking on to a slew of recent reports that have shattered Wall Street expectations.
“Stocks are rallying after another wrath of mixed earnings and better-than-expected factory data that eased concerns over persistent inflation,” Moya said Tuesday. “Delta variant fears are only delaying some pent-up demand from consumers, and the growth outlook in the U.S. remains strong, possibly more now that some businesses will require proof of vaccination,” he added, referring to new measures being imposed by both businesses and local governments to curb rising Covid-19 cases.
In a Tuesday note, Vital Knowledge Media Founder Adam Crisafulli agreed with Moya in arguing increased inoculation mandates helped boost the market Tuesday in light of the “awful” resurgence in cases nationwide. “[Vaccination requirements] reflect a shift in the reaction function whereby officials are deciding to impose penalties on those avoiding vaccines rather than shutting down whole swaths of the economy,” he said, adding that the mandates are “very much welcomed by the market.”
As markets crashed at the height of pandemic uncertainty in March 2020, Fed Chair Jerome Powell pledged to use the Fed’s “full range of tools to support the U.S. economy” until “substantial further progress” is made toward a full economic recovery. Since then, the S&P has skyrocketed nearly 92% from a mid-pandemic low, while the Dow and Nasdaq have posted similarly stunning gains of 83% and 115%, respectively. Fears that the government’s heightened spending could spur problematic inflation have triggered bouts of volatility this year, but the Fed has repeatedly insisted it doesn’t believe price spikes have thus far been problematic. Testifying before Congress last month, Powell said the central bank would announce any policy changes “well in advance” of their implementation, ushering in the market’s latest highs.