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S&P and Nasdaq hit all-time highs to start the week as investors await key Fed summit

S&P and Nasdaq hit all-time highs to start the week as investors await key Fed summit

23 Aug 2021

Traders on the floor of the New York Stock Exchange, August 11, 2021.

Source: NYSE

Stocks were higher Monday morning following a volatile week on Wall Street as investors eye a key event where the Federal Reserve could hint at prospects for tapering stimulus.

The Dow Jones Industrial Average gained 290 points, or 0.8%. The S&P 500 added 1% to reach an all-time high of 4484.78. The Nasdaq Composite rose 1.2% to 14904.86, also an all-time high.

Shares of vaccine makers are trading higher after the Food and Drug Administration granted full approval for the two-dose Pfizer-BioNTech vaccine on Monday morning, the first licensing of a vaccine for Covid-19. Pfizer shares are up 3.7%. Its partner BioNTech‘s stock jumped 9% and Moderna is 5% higher. Trillium Therapeutics is soaring on news that it’ll be acquired by Pfizer. Its shares are up 188%.

Travel and leisure stocks reacted positively to the vaccine approval, with Delta and American Airlines moving 2% higher. Carnival and Norwegian Cruise Lines also gained 2%.

Energy stocks are leading the S&P 500, which is seeing its best gain since July 23. Diamondback Energy and Occidental Petroleum are 6% higher, and Devon Energy gained 5%.

Bitcoin hit a three-month high on Sunday, punching above $50,000 and pulling crypto-adjacent stocks up with it. Coinbase and Microstrategy are 2% higher.

Major averages are coming off a losing week as investors grew worried that the Fed’s potential move to pull back monetary stimulus could slow down the economic recovery that is already challenged by the spread of the delta Covid-19 variant.

“Markets may take a breather after their recent run, but strong Q2  results  have  provided  a  fundamental  justification and  reinforced  our confidence in the sustainability of the recovery,” according to Barclays.

Traders are eagerly awaiting the Jackson Hole symposium for clues on the Fed’s timeline for dialing back its $120 billion a month bond-buying program. The event takes place virtually on Thursday and Friday. The Fed previously was going to conduct the event in a mixed virtual and live presentation, but decided Friday to go all virtual in light of the rising virus risk.

Chairman Jerome Powell’s speech will be titled “The Economic Outlook,” which “may suggest the speech could have a more near-term focus,” Nomura economist Aichi Amemiya said in a note.

“Given the recent deterioration in incoming data and the pandemic situation, we see some risk Powell focuses on increased uncertainty due to the latest COVID-19 surge,” Amemiya added. “At a minimum, we view recent comments from Fed officials as supporting our view of a December tapering announcement despite a preference on the FOMC for November as of the July meeting.”

The blue-chip Dow fell 1.1% last week, while the S&P 500 declined nearly 0.6%, breaking a two-week winning streak. The tech-heavy Nasdaq dipped 0.7% during the week.

“We suspect investor conviction is being challenged by the potential for upcoming monetary policy changes, shifting growth vs. value rotations, and a rising trajectory of new coronavirus cases,” Craig Johnson, technical market strategist at Piper Sandler, said in a note.

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For the month of August, major benchmarks are poised to post modest gains. The S&P 500 is up 1.1% month to date, while the blue-chip Dow has gained 0.5% and the Nasdaq has climbed 0.3%.

“August is a historically volatile month for markets and this year is no different, with investors currently climbing multiple walls of worries,” said Rod von Lipsey, managing director at UBS Private Wealth Management. “Upticks in Covid-19 cases and a downward spiral in Afghanistan are creating a crisis of confidence, at a time when many investors are on holiday.”