During the week, the stock market saw the rise of the United States, which allowed DowJonesIndustrialAverage Index and S & P 500 to reach record highs, while NasdaqComposite increased above the level at which completed in 2015.
US stock index S & P 500 reached a record level of the first in more than a year on Monday as a result of strengthening of investors’ expectations regarding the US economy remains stable in the period of instability in the world.
More positive than expected data on the US labor market, published on Friday, had S & P 500 support, which grew by more than 16% since then, in February fell to an annual minimum. growth stocks contributed to signs of strength of the US economy, the recovery in oil prices seen recently, as well as a cautious stance of the Federal Reserve System of the USA in regard to raising interest rates.
According to some investors and analysts, it underlines the attractiveness of the rally in US stocks at a time when the global economy is faced with uncertainty in the wake of the British referendum. At the same time, central banks continue easing monetary policy to stimulate economic growth and inflation, which promoted government bond yields to historic lows.
Since May 2015 S & P 500 rises slowly and unevenly, occasionally interrupted due to concerns about the global economy, including the growth rate of China’s GDP, prolonged drop in oil prices, the direction of movement in interest rates and, more recently, the British referendum. Index approaching the previous high at least three times, but always rolled away.
Despite the sharp drop in two cases this year, S & P 500 continues to recover, and investors buy shares, known for their relative stability, such as paper utility companies. According to analysts and fund managers, stock options are few because government bond yields are at historic lows due to buying by central banks and the policy of “cheap” money.
DowJonesIndustrialAverage Tuesday hit a record high, and NasdaqComposite increased above the level at which completed 2015. Meanwhile, the S & P 500 hit a new high for a second day.
The growth of technology-oriented Nasdaq index began encouraging signal for the traders who were not sure of the duration of the growth in the stock market.
After a strong growth compared to the other major indexes in the last four years the Nasdaq showed unsatisfactory trend in 2016, as investors favored sectors of action, yielding high dividends such as utilities sector shares and sold shares of technological sector and the health sector.
“As the situation is less alarming, it makes sense to buy riskier, growth-oriented stocks,” – said a senior market strategist VoyaInvestmentManagement.
Prices of risky assets have grown, as safe-haven assets have decreased in value. The yield on government bonds continued to grow with the recent record lows. The yield on 10-year US Treasury bonds reached 1.512% against the record low of 1.366% on Friday.
Gold prices on Tuesday fell by 1.5%, to 1332.10 dollars per ounce, showing the most significant day fall in percentage from 24 May.
In the US, investors switched to companies reporting season, which begins this week.
The growth of US stock indices to record highs observed earlier this week, continued on Wednesday. DJIA and S & P 500 again closed at new highs.
These indexes reached record highs for the first time in more than a year earlier this week. This shows that, in the view of investors, US stocks remain attractive amid fears of slowing global growth and the effects of the UK decision to withdraw from the EU.
For further growth of the index, according to investors, it is necessary reversal of positions on protecting assets and improving corporate profits. The yield on government bonds on Wednesday once again fell, gold prices rose.
“How quickly the US market recovered Brexit, was a surprise”, – said Thomas Wilson, senior investment manager BrinkerCapital.
S & P 500 index took 10 trading days to regain ground lost after a referendum in the UK, which took place on June 23 and another session to reach a record high.
Energy stocks weighed on the market on Wednesday, falling to 0.7% in the S & P 500 up.
Oil prices on trading results fell by 4.4%, to 44.75 dollars per barrel. This is the lowest closing level since 10 May. The fall happened after data pointed to a record high in US stocks of oil and petroleum products. This month, oil prices have fallen by 7.4%.
Meanwhile, Theresa May has become the new British Prime Minister after David Cameron left the post. However, some investors expect that uncertainty will persist.
“Brexit – this is a real risk that seems to be undervalued on the market”, – said Nick D’Onofrio, Managing NorthAssetManagement in London. “It will slow down the growth of the UK economy, which spread to Europe.”
On Thursday, the Bank of England will hold a meeting dedicated to monetary policy. Analysts expect the central bank will lower interest rates by a quarter percentage point, to 0.25% to counter the negative effects Brexit.
Many investors expect the other major central banks will also keep interest rates low.