Stocks in the United States leapt to a record on Thursday, as investors spotted a rosy backdrop for the market despite recent chaos in the Middle East.
The gains reflected growing confidence among investors that, even after surging nearly 30 percent last year, the stock market remains in something of a sweet spot: Interest rates are low, American unemployment is near a 50-year low, and consumer confidence is high. The trade war with China — a big boogeyman for investors — appears to be simmering down, and companies claim to see an improving outlook for profits and the global economy.
Aside from the specter of a potential military confrontation with Iran — which investors have decided is somewhat less likely after comments from President Trump on Wednesday — what’s not to like?
“The economy seems to be doing better and interest rates are going to stay low,” said Bruce Bittles, chief investment strategist at money management firm Baird. “So that’s a good combination.”
Shortly after the open of trading the S&P 500 was up 0.5 percent, above a high reached on Jan 2. Technology companies and financial shares led the gains. The Nasdaq touched a record for the second straight day, rising 0.9 percent.
Apple and Microsoft — which have outsize sway because of their $1 trillion-plus market capitalization — were up 1.7 percent and 0.9 percent. Two slightly smaller tech behemoths, Alphabet and Amazon, were both up more than 1 percent.
Apple was buoyed by reports of increased shipments of iPhones to China, in the run-up to the important lunar new year gift giving season later this month.
Semiconductors stocks, which were battered by the trade war between China and the United States last year, were also rising on Thursday.
Advanced Micro Devices, a chip maker sensitive to the trade fight, was up more than 4 percent, after analysts at Mizuho Securities placed a buy rating on the shares. The analysts cited their expectations for a surge of corporate spending on servers in 2020 “especially as U.S.-China tensions improve.”
Such moves underscore a relaxation in the fight between the world’s two largest economies. China’s Commerce Ministry official confirmed on Thursday that the nation’s economic czar will visit Washington next week to sign an interim trade deal. Improvement in the trade fight could be a boon to the global economy, which has slowed sharply in recent years.
That slowdown has been a drag for American manufacturers, too. But there’s little indication of a slowdown in American consumer spending, which is buttressed by low unemployment rates. At 3.5 percent, the jobless rate is near the lowest levels seen in 50 years. Economists expect that data to be released on Friday will show it remained at 3.5 in December.
Low levels of unemployment would traditionally be nudging policymakers at the Federal Reserve to lift interest rates, to head off an outbreak of inflation, but this time is different.
With little indication that inflation is set to rise meaningfully, the Fed — which has faced an unusual level of public criticism from Mr. Trump — is saying it is in no hurry to lift rates, which stock investors typically see as a kind of death knell for market rallies.