The S&P 500 index has reached new highs today, as stocks on Wall Street were boosted by better-than-expected indications of how the economy is faring.
By Peter Martin
Wednesday, May 28, 2014
The Dow Jones Industrial Average rose 0.35% or 57 points to 16,666.4, taking the index within 72 points of its all-time high, while the S&P 500 pressed higher from the record closing price it set on Friday, gaining 0.45% to stand at 1909.0, with financial stocks leading the advance.
After the financial markets were closed on Monday for the Memorial Day holiday, Tuesday’s good news began with the release of the April durable goods orders report, which showed a 0.8% rise month-on-month and a big upward revision to March’s growth, amended from an originally-reported 2.5% to 3.6%.This bucked the expectations of analysts, with the consensus estimate calling for a 0.8% drop in orders. A large portion of the growth was down to orders in the volatile transportation component, however, and orders rose at a more modest 0.1% if transportation is excluded. Given the surge seen in March, any indication of further growth is good news though, and tends to agree with other manufacturing indicators that the sector is in good health currently – regional surveys released today from both the Dallas and Richmond Fed showed solid growth for May.
House prices continue to rise according to two notable gauges released today. The Federal Housing Finance Agency (FHFA) said that its home price index advanced 0.7% on March, for a year-on-year rise of 6.4%, just slightly ahead of expectations, while Case-Shiller’s 20-city home price index climbed a seasonally-adjusted 1.2% in March. Both reports show a slight slowing in the rate at which prices are gaining, but remain at strong levels and this may have a double-edged effect: on the one hand, higher prices should boost homeowner’s sense of wealth, which can aid consumer spending levels, but more expensive house prices may hamper home sales.
The Conference Board’s consumer confidence index, one of the foremost measures of how consumers feel about the economy and its outlook, pushed higher this month to a reading 83.0, up from the 81.7 seen last month. Holding higher than the 80 mark is a good sign for how positive consumer attitudes are currently and would be expected to bode well for consumer spending.
Also pushing higher this month is Markit’s reading on the service sector, with its flash services PMI rising to 58.4 from April’s level 54.2. The new business and employment components are both notably higher. This indication of growth accelerating in May will raise expectations for second-quarter GDP growth and is part of the upbeat sentiment that is fuelling today’s stock market rally as well as strengthening the US dollar.
The dollar gained against many of its major counterparts, most notably against the pound and the Swiss franc, with GBP/USD slipping 0.21% to 1.6808 and USD/CHF up 0.22% at 0.8966 by mid-afternoon in New York. The euro was down just 0.07% against the dollar at 1.3635 after earlier sliding as low as 1.3613, the lowest price reached by the forex pair in more than three months, following fresh hints yesterday from ECB president Mario Draghi that eurozone policymakers will take action next month to fight low inflation. Mr Draghi said in a speech in Portugal that the ECB’s governing council needs to be on guard against ‘a risk that disinflationary expectations take hold’.
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