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The S&P 500 has been trading at record-high levels. Analysts expect the markets to trade at their peak until the government provides stimulus to back the economic recovery.
On Thursday, July 15, the world’s largest equity index S&P 500 remained under pressure despite the strong earnings season. The S&P 500 (INDEXSP: .INX) index dipped 0.33% or 14 points closing at 4360 levels.
Nearly 18 companies listed on the index delivered overwhelming results against Street expectations. Interestingly, the average earnings-per-share result was also 18% higher than expected. However, most of these companies registered a 0.5% dip in their share price after reporting. Speaking to CNBC, Liz Ann Sonders, chief investment strategist at Charles Schwab, said:
“The market did as well as it did in the past year because it was in anticipation of the improvement in earnings that we’re seeing right now. A lot of news has been priced in.”
S&P 500 and Other Indices amid the Earnings Season
Along with the S&P 500, the tech-heavy Nasdaq dropped 0.7% to 14,543 levels amid the earnings season. Technology stocks drifted lower on Thursday after a strong uptick earlier this week. The Alphabet stock (NASDAQ: GOOGL) dropped 0.9%, the Apple stock (NASDAQ: AAPL) dropped 0.45%, and the Amazon stock (NASDAQ: AMZN dropped 1.3%.
The S&P 500 has been hovering around its all-time high levels. Despite the minor drop on Thursday, the S&P 500 is up 17.82% this year. The only index to buck the trend yesterday was the Dow Jones Industrial Average (INDEXDJX: .DJI) surging 0.15%.
Market Will Continue at Record Levels
Jeffrey Gundlach, DoubleLine Capital chief executive said that he expects the market to continue trading at record levels as long as stimulus remains intact to help the economy recover from the pandemic. Speaking to CNBC, Gundlach said:
“I think the whole question for investors is…how long this free money stimulus is going to go on. As long as it goes on, I think the stock market can stay at nosebleed levels as it has been and continue to grind higher.”
During his two-day appearance before the US Congress, Fed Chairman Jerome Powell said that the central bank will continue to evaluate the economic recovery. Speaking about the rising inflation, he said:
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected or that anybody had expected. To the extent that it is temporary, then it wouldn’t be appropriate to react to that. But to the extent that it gets longer and longer, we’ll have to continue to reevaluate the risks that would affect inflation expectations and would be of longer duration and that’s what we’re monitoring”.
The banking giants have done exceptionally well last quarter beating street estimates by a greater margin. The surge in consumer spending has helped banks fuel their earnings last quarter. On Thursday, banking giant Morgan Stanley (NYSE: MS) delivered better than expected results. However, its stock closed just 0.18% up.