Tuesday afternoon saw the stock market close at a record high, beating even the peaks set in 2018. A continued rally, stable interest rates, and optimism for earnings are helping to drive prices upwards. While this might not be great news for investors looking for bargains on big stocks, it’s a good sign for the economy and will result in healthy gains for most portfolios.
Benchmark Stock Indexes are Flying High
The S&P 500 (SPX) and the NASDAQ Composite (COMP) both hit records on Tuesday.
- The S&P 500 closed with a gain of +0.9%, leaving the entire index at 2,934 points, an increase over the previous record of 2,930.
- The NASDAQ Composite gained +1.32%, leaving it at 8,120 points, beating the previous record of 8,109.
These figures are a stark difference to the stock market four months ago. On December 24, 2018, the market looked certain to be entering a bear period. Some isolated stocks did enter bear territory, declining 20% or more from their previous peaks.
That all turned around in post-Christmas trading, with investors finding new confidence, which has held throughout this year. Healthcare and consumer-discretionary stocks led the rally on Tuesday.
Earnings Season Looking More Positive for Stocks
There have been warnings that the largest public companies would report weakened earnings this quarter. Analysts have advised investors to be cautious in their expectations. However, some early signs show that market fears may have been overinflated.
- Twitter (NYSE: TWTR) gained 16% on Tuesday after beating Wall Street expectations in its financial report. The company made $191 million of profit in the first quarter, vastly outperforming the $61 million made in the same period a year ago.
- Lockheed Martin (NYSE: LMT) was another strong performer. The aerospace company generated $14.3 billion in revenue, blowing out the Wall Street consensus of $12.6 billion. The company also raised its full year revenue forecast, expecting between $56.8 billion and $58.3 billion.
These two vastly different companies prove that it’s not impossible to grow, even as the economy cools. While earnings season has only just begun, investors may find many pleasant surprises in the coming weeks.
Now is the best time to recalibrate and assess holdings. It’s possible that the current market rally could continue into the second half of the year if earnings growth remains strong.
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