The Dow Jones Industrial Average and the S&P 500 both closed at record highs Thursday, bolstered by suggestions from Federal Reserve Chairman Jerome Powell that the central bank would cut interest rates at its next meeting, and a healthcare stocks rally that followed the Trump administration's plan to tighten the rule on annual rebates.
The Dow, which passed 27,000 for the first time ever in trading Thursday, ended up 227.88 points, or 0.85%, to 27,088.08. The S&P 500, which passed 3,000 for the first time on Wednesday, ended up 0.23% to 2,999.91. The Nasdaq ended down 0.08%.
"Sure, 27,000 is just a number and in the whole scope of things isn't meaningful," said Ryan Detrick, Senior Market Strategist for LPL Financial. "What it is though, is a reminder for all investors that this bull market has ignored all the scary headlines for years and the dual benefit of fiscal and monetary policy could mean it has a lot longer to go than most expect."
"I think the combination of monetary and fiscal stimulus is going to drive stocks higher," said Jamie Cox, managing partner for Harris Financial Group. "In 2018, you had monetary policy being a negative, fiscal policy being a positive and you didn't get anywhere. In 2019 it's different. You have monetary policy being supportive of stocks going up, and you have fiscal policy that still persists and is still robust. I think that's the real reason."
Cox said the Dow would have gone higher, had it not been for the pharmaceutical sector, where such companies as Pfizer (PFE - Get Report) , Merck & Co. (MRK - Get Report) , and Eli Lilly (LLY - Get Report) all lost ground.
"Pharma is getting absolutely shellacked," he said. "I think being in the crosshairs of both parties in advance of an election year is definitely not a good place to be. It's the one area where Democrats and Republicans can agree-they can beat up on pharma and there's no negative repercussions."
UnitedHealth (UNH - Get Report) lead the Dow, rising 5.5% to $261.19, along with other healthcare managers after the Trump administration dropped a plan to tighten the rules on annual rebates that are worth billions of dollars to the industry. Shares of CVS Health (CVS - Get Report) were also up, rising 4.7% to $57.96.
Powell told lawmakers Wednesday and Thursday that slowing global manufacturing growth, tame inflation readings and the lingering U.S.-China trade dispute were all having an impact on business confidence and investment.If those continued, Powell said, near-term growth and inflation levels could slow further, and there then could be some merit in an "insurance" rate cut in order to prevent those conditions from developing even more.
The Consumer Price Index rose by 0.1% in June, the same as in May, the Labor Department said. Economists had forecast no increase in June, based on a survey by FactSet. Excluding prices for food and energy items, which can vary widely, the index rose 0.3% in June, accelerating from the 0.1% clip reported for May.
"It's a little higher than we thought but it seems like it's going to take a lot more than a monthly data point to push Powell away from his dovish stance," said Mike Loewengart, vice president of investment strategy for E*Trade. "The Fed has pretty much made it clear that the negatives of a cooling economy and ongoing trade tensions outweigh the positives of a Goldilocks inflation number and last week's solid jobs read."
In fact, Loewengart added, "based on what we've heard from Fed officials recently, this read could even be interpreted as too low for the Fed's comfort, which again is a stark reminder of how far the Fed's perspective has shifted in only a year."
The Trump administration has launched a probe of France's digital tax which appears to target U.S. tech giants such as Alphabet (GOOGL - Get Report) , Amazon.com (AMZN - Get Report) and Facebook (FB - Get Report) and is projected to raise around $560 million each year for the French treasury.
Are Tech Giants Too Big? Apple, Facebook, Alphabet and Amazon to Face CongressBed Bath & Beyond (BBBY - Get Report) shares fell 3% to $11.17 after the home retailer posted stronger-than-expected first quarter earnings but cautioned full-year profits and sales would be at the lower end of previous guidance. Bed Bath & Beyond is Real Money's Stock of the Day.
Delta Airlines (DAL - Get Report) shares rose about 1.1% to $60.14 after the company posted stronger-than-expected second quarter earnings and lifted its full-year profit guidance, as non-ticket and premium product revenues boosted topline growth.
Global oil prices were mixed Thursday as a tropical depression that could accelerate into a hurricane heads for the Louisiana coast, forcing the evacuation of key drilling platforms in the Gulf of Mexico. There were also heightened tensions in the Middle East after armed Iranian boats unsuccessfully tried to seize a British oil tanker in the Persian Gulf Wednesday. They withdrew after warnings from a British warship.
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