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Retail Earnings Optimism Drives Dow Jones and S&P 500 to Record Highs

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by Bhushan Akolkar · 3 min read
Retail Earnings Optimism Drives Dow Jones and S&P 500 to Record Highs
Photo: NYSE / Twitter

The indexes hit a record high as nearly 87% of S&P 500 companies have reported positive EPS during the second quarter of 2021. This is the fastest 100% growth in S&P 500 since World War 2.

On Monday, August 16, The US Stock Indices touched record highs on the optimism of major retail earnings ahead this week. The Dow Jones Industrial Average (INDEXDJX: .DJI) surged 110 points giving a closing at 35,625 levels. 

Similarly, the S&P 500 (INDEXSP: .INX) surged 0.2% giving a closing at 4479 levels. Interestingly, the S&P 500 has also doubled from its pandemic low close on March 23, 2020. Thus, it makes the index’s fastest 100% rally doubling from the bottom since Word War 2. The S&P 500 attained this milestone in just a matter of 354 days.

Even during the 2008 financial crisis, the equity index took two years to double from the bottom. Speaking to CNBC, Ryan Detrick, chief market strategist at LPL Financial said:

“Usually it takes many years to double, so this is another way of showing just how incredible this bull market has been”.

Many analysts attribute this growth to the unprecedented growth of the fiscal and monetary stimulus offered by the US government. Furthermore, to boost economic activity, the Federal Reserve slashed the interest rates to near zero. It also provided additional support by flooding the market with $120 billion in additional monthly bond purchases.

The strong rally in the market has been backed by strong corporate earnings. For the first quarter of 2021, the S&P 500 companies reported 53% year-over-year earnings growth. The index is now set to post a massive 93.8% surge for the second quarter.

Retail Earnings Optimism

Amid the recent quarterly earnings report, retail stocks have inched higher. Ahead of Tuesday’s report, Home Depot (NYSE: HD) and Walmart Inc (NYSE: WMT) surged 1.1% and 0.8% respectively. Earlier on Monday, Walmart also announced its plans to hire a Crypto Product lead.

On Wednesday, retail giants Target (NYSE: TGT) and Lowe’s (NYSE: LOW) shall be releasing their earnings reports. Thus, optimism has helped both these stocks to inch higher on Tuesday.

As per data from FactSet, a whopping 87% of the S&P 500 companies have reported positive earnings per share for the second quarter. If the percentage remains intact, it will be the highest % growth of S&P 500 companies since the 2008 financial crisis.

However, concerns of slowing global growth have been hovering over Wall Street recently. This comes amid a lagging performance in China’s economic growth along with the fall in oil prices. Last month, the Chinese economic growth was lower than expected.

In July, China’s retail sales surged 8.5% year-over-year against the expected 11.5%. Also, online sales gained only 4.4%. Similarly, industrial production surged only 6.4%, below the 7.8% consensus estimate.

China’s National Bureau of Statistics cited domestic flooding and the spread of the Covid Delta variant as the reason behind it. It also admitted that the country’s “economic recovery is still unstable and uneven.”

Post the release of the Chinese economic data, oil prices also dropped on Monday. Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX) both lost more than 1%.

Market News, News, Stocks
Bhushan Akolkar

Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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