Trade-sensitive industrial stocks led the Dow Jones Industrial Average to a record closing high on Thursday, the last of Wall Street’s main indexes to fully regain ground since a correction that began in January.
All three major domestic equity indexes closed higher as trade worries subsided. Technology companies led the Nasdaq higher, along with the S&P 500, which also hit a new closing high.
Microsoft and Apple rose 1.7 percent and 0.8 percent, respectively. The companies headed up the tech sector’s 1.2 percent gain.
The market took the ongoing trade dispute in stride, and was further boosted as the dollar index fell to its lowest in more than ten weeks. A weaker dollar supports U.S. exports.
The last time the S&P and Dow hit record intraday highs without the Nasdaq following suit was Dec. 13, 2017. Of the 11 major sectors of the S&P 500, all but energy ended the session in positive territory.
Among the FAANG group of momentum stocks, Netflix closed lower. The remaining FAANGs gained ground, with Facebook, Apple, Amazon and Alphabet gaining between 0.8 and 1.8 percent.
Nike gained 1.1 percent after an analysis of the company’s online sales data by Thomson Reuters Proprietary Research revealed it had sold out of 61 percent more merchandise since the appearance the ad campaign featuring NFL player Colin Kaepernick.
Shares of Under Armour rose 6.6 percent after the company announced it was cutting 3 percent of its workforce as part of its turnaround scheme.
Defense stocks, including Northrop Grumman, Lockheed Martin and Raytheon lost ground after the United States said it was ready to resume talks with North Korea after Pyongyang pledged to denuclearize by 2021.
General Electric fell 3.1 percent after reporting problems with its new power turbines, prompting J.P. Morgan to lower its price target.
Approximately 6.88 billion shares changed hands on the major domestic equity exchanges on Thursday, as compared to the 6.31 billion share average over the past 20 trading days.
S&P 500 Telecommunications Sector Index Is Gone
The S&P 500’s three-company telecommunications services index is about to be folded into a much higher-profile group, but a brighter spotlight may not be enough aid those three companies as investors continue to orient towards growth sectors.
The three telecom stocks are Verizon Communications, AT&T and CenturyLink all three of which will be included a newly-minted S&P 500 Communications Services Sector on Monday, along with Netflix, Alphabet and Facebook.
The telecom sector has been the biggest loser among the S&P’s 11 major sectors with a 4.4-percent decline so far in 2018, driven by AT&T’s 13.3-percent decline. In comparison, many of the other companies joining the group have shown strong gains for the year with Netflix rising 91.5 percent, Twitter up 21.7 percent and Alphabet chalking up a 10.8 percent gain.
As a result, passive investors will end up with telecom exposure by default if they invest in exchange-traded funds (ETFs) that mirror the new communications index.
However, investors are likely to continue to ignore telecom stocks, which are typically viewed as defensive investments because of slower, though relatively predictable, growth rates and high dividends. Instead, they may look to faster-growing internet or media companies for exposure to the growth-oriented communications sector.
Wall Street expects the S&P 500 communications sector to generate 21 percent earnings growth and 11.1 percent revenue growth for 2018, compared with 16.7 percent earnings growth and 7.4 percent revenue growth for the telecom stocks, according to data collected by Thomson Reuters.
Estimates for the next 12 months imply a trading multiple of 18.4 for the communications sector compared with the telecom sector’s multiple of 10.6, according to Thomson Reuters data.
While new ETFs will give some support to telecom stocks, the decisions of active investors, could have a bigger impact on performance after the reshuffle as passive investments represent a much smaller portion of equity investments. According to a 2017 estimate from BlackRock, less than 18 percent of the global stock market is owned by index-tracking investors.
Growth funds with large-cap investments have been sharply outperforming large-cap value funds with a 16.4-percent increase in value so far in 2018 while value counterparts gained 4.4 percent. In the last five years, growth funds rose 14.9 percent versus 10 percent for value funds, according to Lipper data.
Jobless Claims Fall Again
The number of new claims for unemployment benefits unexpectedly fell again last week, hitting a 49-year low in a sign the job market remains strong.
According to a report by the Labor Department that was release Thursday morning, initial claims fell by 3,000 claims to a seasonally adjusted level of 201,000 claims for the week ended Sept. 15. That is the lowest level since November 1969. The prior week was unrevised.
The Labor Department indicated that only Hawaii’s claims were estimated last week. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, declined by 2,250 to 205,750 last week, the lowest level since December 1969.
The labor market is viewed as being near or at full employment. It continues to strengthen, with nonfarm payrolls increasing by 201,000 jobs in August and annual wage growth notching its biggest gain in more than nine years. Job openings hit an all-time high of 6.9 million in July.
Though there have been reports of some companies either planning job cuts or laying off workers because of trade tensions between the United States and its major trade partners, those reductions have been partially offset by increased hiring in the steel industry.
Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid fell 55,000 to 1.645 million for the week ended Sept. 8, the lowest level since August 1973. The four-week moving average of the so-called continuing claims fell 20,750 to 1.691 million, the lowest level since November 1973.