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Market Snapshot: Dow, S&P 500 extend gains into record territory after ISM services index hits highest since 1997

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Stock-market benchmarks climbed on Monday, as U.S. investors saw another round of good economic news from the services sector, adding to the array of improving economic indicators, including a stellar March jobs report from last Friday.

Most markets were closed in Europe in observance of Easter Monday.

U.S. investors are returning from a three-day weekend that saw cash trading in equities — and most other markets — closed in observance of the Good Friday holiday; trading in equity futures closed at 9:15 a.m. Eastern on Friday, about 45 minutes after the release of the labor-market report.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average
    DJIA,
    +1.12%

    rose 356.13 points, or 1.1%, to 33,509.34, passing its previous record of 3,3171.37 hit on March 9.
  • The S&P 500
    SPX,
    +1.29%

    added 48.88 points or 1.2%, to trade at 4,068.80.
  • The Nasdaq Composite
    COMP,
    +1.26%

    climbed 168.77 points, or 1.3%, to 13,648.88.

On Thursday, the Dow rose 171.66 points, or 0.5%, to 33,153.21, the S&P 500 gained 46.98 points or 1.2%, to 4,019.87, while the Nasdaq Composite Index added 233.23 points, or 1.8%, to 13,480.11.

What’s driving the market?

Investors were wading through a swell of good news on the economic front. Job growth accelerated in March on the back of gains in restaurants and other businesses, marking the best report from the Labor Department in seven months as the U.S. added 916,000 new jobs and the unemployment rate fell to 6% from 6.2%.

On Monday, the Institute for Supply Management said its services index jumped to 63.7% in March, its highest since 1997, from 55.3%. Any reading above 50% represents an expansion in economic activity.

The services sector has felt the brunt of the pain from pandemic lockdowns and social-distancing protocols intended to limit the spread of the deadly disease. The sharp rebound in activity among banks, restaurants and other service businesses at the start of the year underlines the boost from vaccines that are helping efforts to reopen the economy.

However, the prospect of a sharp economic recovery, powered by a $1.9 trillion COVID aid package, with President Joe Biden also backing a $2.3 trillion infrastructure program, has stoked worries that the economy may overheat and compel the Federal Reserve to raise interest rates sooner than initial projections for 2023 or 2024.

“Growth prospects, the risk of inflation and the pace of vaccinations remain the dominant factors moving financial markets,” wrote Hussein Sayed, chief market strategist at FXTM, in a daily note.  

“Investors seem to be front-running the Federal Reserve, anticipating at least a 25-basis point rate hike by the end of next year…If parts of Biden’s infrastructure proposal come to fruition in the next couple of months, we’re likely to see more policy makers joining the hawks,” Sayed wrote.

Equities may also face some headwinds as the prospect of higher corporate taxes shadows investors. Treasury Secretary Janet Yellen is set to call for a global minimum corporate tax as she supports the Biden administration’s plans to lift corporate taxes to fund the infrastructure plan, according to Axios.

Looking ahead, market participants will glean some insights from the central bank when minutes from their March 16-17 policy meeting are released on Wednesday.

In public health news, the U.S. is unlikely to face a “true” fourth wave of COVID-19 outbreaks, but the country should wait a few weeks longer before easing mitigation efforts, said Dr. Scott Gottlieb, the former Food and Drug Administration commissioner, on Sunday. His comments came as the global tally for the coronavirus-borne illness rose above 131.3 million on Monday, according to data aggregated by Johns Hopkins University, while the death toll rose above 2.85 million.

“The disease isn’t going away, but the fear of dying or severe cases is fading. That will push life back in the direction of normal as spring rolls into summer,” said James Meyer, chief investment officer at Tower Bridge Advisors.

The U.S. continues to lead the world in cases, at 30.7 million, or about a quarter of the global tally, and fatalities, at 555,001. The country has averaged 64,019 cases a day for the past week, up 18% from the average two weeks ago, as cases continue to rise despite the vaccination program, a trend experts say is due to states reopening and dropping restrictions on movement and overall pandemic fatigue.

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Which stocks are in focus?
  • GameStop Corp. shares
    GME,
    -0.97%

    traded down 6.7% Monday, after the videogame and consumer electronics retailer filed to sell up to 3.5 million shares of its common stock “at the market.” That represents about 5% of the 69.9 million shares outstanding as of March 17.
  • Wedbush Securities has upgraded its outlook for Tesla Inc.
    TSLA,
    +5.17%
    ,
    following stronger-than-expected quarterly deliveries. Shares of Tesla gained 5.1%.
  • Emergent BioSolutions Inc. 
    EBS,
    -3.17%

     shares were up 1.6% Monday after it said it was on track with all commitments for COVID-19 vaccines and reaffirmed its financial guidance, after a production problem at its Baltimore plant last week ruined a batch of the vaccine developed by Johnson & Johnson
    JNJ,
    +0.71%
    .

  • Shares of Sempra Energy
    SRE,
    +2.29%

    rose 2.4% after the energy infrastructure company said Monday that it had sold a 20% non-controlling stake in Sempra Infrastructure Partners to investment firm KKR for $3.37 billion in cash.
Which assets are on the move?

The Ratings Game: AMC Entertainment stock bounces back after B. Riley analyst turns bullish

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