U.S. markets surged to new heights during a shortened, pre-Independence Day session as disappointing private-sector job data reinforced investor hopes for interest rate cuts.
The Dow Jones industrial average climbed 179 points, about 0.7 percent, to a record 26,966. The index breezed past a benchmark not seen since Oct. 3, 2018, when it ended at 26,828, capping a remarkable rebound following months of global trade tensions and cooling economic indicators.
Procter & Gamble, Cisco Systems and Merck & Co. led the Dow’s surge. Caterpillar, Dow Chemical and JPMorgan Chase were the only three among the 30 blue chips to drop on the day.
The Dow has been weighed down more than other U.S. indexes this year, in part because of the troubles with Boeing, which is one of its biggest components.
The Standard & Poor’s 500-stock index also closed at a new high on expectations for more Fed accommodation. The S&P 500 finished the session at 2,995.82, up around 0.8 percent, and delivered its third successive closing record this week. The broad market got a boost from software maker Symantec, which jumped more than 13 percent on news that Broadcom was close to a deal to buy the company.
All 11 stock market sectors were positive Wednesday, with consumer discretionary, real estate and consumer staples leading the way.
The tech-heavy Nasdaq Composite also reached a new high, advancing about 0.8 percent to end at 8,170.23. Tesla, Starbucks and Kraft Heinz were among the Nasdaq leaders.
The market bounce came on the heels of frustrating news on private-sector job creation. Only 102,000 jobs were created in June, far below the 135,000 expected, according to a report from ADP and Moody’s Analytics.
The jobs miss fueled optimism by investors that the Federal Reserve will lower interest rates to help sustain the longest economic expansion, now in its 10th year, on record.
“This weaker jobs number keeps the Fed at the table,” said Washington investor Michael Farr. “But this is not healthy. Anticipating more help from the government, rather than stronger fundamentals, is not healthy for investors and is the stuff of which bubbles are made.”
Investors were also cheered by President Trump’s announcement Tuesday night that he would nominate Judy Shelton and Christopher Waller to the Fed board. Both economists could be advocates for the low interest rate policies the president favors.
The president has repeatedly criticized the Fed and its chair, Jerome H. Powell, for raising interest rates last year. Trump had planned to nominate former business executive and presidential candidate Herman Cain and conservative editorial writer Stephen Moore, but they withdrew after some Senate Republicans expressed doubts over their qualifications.
The markets will get another test Friday morning, when the all-important Labor Department report on June employment is released.
“Investors are telling you it’s a win-win situation for stocks at this point,” said economist Chris Rupkey of MUFG. “If the payroll jobs number is weaker than expected, we know that the Federal Reserve stands ready to ride to the rescue. At this point, there’s not a lot of risk out there.”
Stocks have been on a roll all week, starting with Monday’s post-summit pop. The United States and China reached a cease-fire on trade at the G-20 meeting over the weekend, allowing investors to launch the second half of the year on a happy note. But worries persist, with slowing economic data creating investor reliance on Fed intervention to keep the markets at their lofty levels.
“Investors are experiencing deja vu, hoping that a rate cut will spur share prices as they did in 1995, when the S&P jumped 34 percent,” said Sam Stovall of CFRA Research. “But if interest rates don’t start falling in July, share prices will.”
All three U.S. stock indexes are way up on the year and coming off one of their best Junes in decades. The Dow last week finished its best first half since 1999 and its best June since 1938. The S&P 500 posted its best first half since 1997 and its best June since 1955. The Nasdaq composite is coming off its best June since 2000.
The Dow is up more than 15 percent to date this year. The S&P 500 is up 19.5 percent, and the Nasdaq has pushed all the way to a 23 percent gain, thanks to the performance of big tech stocks.
Five companies — Facebook, Apple, Amazon, Microsoft and Disney — were responsible for a third of the broad market’s 2019 gains coming into this week. They’re collectively worth more than $3.4 trillion as measured by the price of their stock. That’s 14 percent of the combined value of all the companies in the S&P 500, according to Howard Silverblatt of S&P Dow Jones Indices. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
History has shown that a positive first half of the year in the stock market usually leads to gains in the second half.
“The Fed is on the side of the bulls,” said Ivan Feinseth of Tigress Financial Partners. “I also think that Trump has shifted to a new position. He absolutely wants upward economic momentum and a high stock market for his reelection bid. He may think he is able to keep the momentum with small steps in trade negotiations with China that don’t culminate in an overall trade deal until after the 2020 election.”