A turbulent day on Wall Street ended in the record books Thursday as the Dow Jones Industrial Average climbed above 27,000 for the first time and the S&P 500 index hit another all-time high.
The milestones came on a day when the S&P 500 briefly moved above 3,000 for the second straight day before an early rally lost some of its momentum.
In Canada, another day of declines in cannabis stocks kept Bay Street slightly in negative territory, with CannTrust Holdings Inc. continuing a string of declines since it disclosed some production was done in unlicensed growing rooms. The stock lost another 1.9 per cent Thursday as the Globe and Mail reported allegations that the company hid thousands of cannabis plants behind temporary walls in order to stage misleading photographs of an unlicensed growing room that were sent to Health Canada.
U.S. stocks have been trending higher for much of the week as investors have grown more confident that the Federal Reserve may cut interest rates for the first time in a decade as soon as the end of this month.
“Sure, 27,000 is just a number and in the whole scope of things isn’t meaningful,” said Ryan Detrick, senior market strategist for LPL Financial. “What it is though is a reminder for all investors that this bull market has ignored all the scary headlines for years and the dual benefit of fiscal and monetary policy could mean it has a lot longer to go than most expect.”
Stocks rose from the get-go Thursday as investors looked ahead to Fed Chairman Jerome Powell testifying before a Congressional committee for the second straight day.
Powell stressed that the Fed is prepared to cut interest rates to support the economy, raising hopes that the first reduction in its key policy rate in a decade could happen later this month.
He noted that “uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook.”
New government data released Thursday showed consumer prices rose in June from a year earlier. The bump in inflation wasn’t expected to give the Fed reason to reconsider whether it should lower rates, if necessary. Inflation has remained muted through much of the economy’s 10-year expansion, which Powell has said cited as a justification for potentially lowering rates.
The early rally weakened by early afternoon after bond yields spiked following weak demand at an auction for 30-year Treasurys. That pulled bond prices lower, driving the yield on the benchmark 10-year Treasury note to 2.14% from 2.06% late Wednesday, a big move. Bonds yields also rose in Canada.
The surge in bond yields marked a reversal from recent weeks, when many investors funneled money into bonds and other less-risky assets amid growing anxiety over the U.S. trade conflicts and signs of a slowing global economy.
Pharmaceutical makers dropped after the White House scrapped a plan to overhaul a system of rebates those companies pay to insurers and distributors. Merck & Co. dropped 4.5%.
The move gave drugstore chains and health insurers a boost, however. Cigna surged 9.2%, CVS Health gained 4.7%, UnitedHealth climbed 5.5% and Anthem rose 5.5%.
Corporate earnings will keep investors busy starting next week, when S&P 500 companies begin reporting results for the April-June quarter.
Companies have been lowering expectations for how much profit they made in the quarter. Wall Street now projects that overall S&P 500 company earnings for the quarter fell 2.6% from a year earlier, according to FactSet. As recently as the end of March, earnings were forecast to be down only 0.5%.
This could be the first time in three years that S&P 500 companies report a back-to-back decline in overall earnings.
“The bars for earnings have been set sufficiently low to keep expectations in check,” said Jamie Cox, managing partner for Harris Financial Group. “We will hear lots about the impact of tariffs, but not much else.”
The S&P 500 rose 6.84 points, or 0.2%, to 2,999.91. The index set three straight record highs last week.
The Dow gained 227.88 points, or 0.8%, to 27,088.08. The Nasdaq composite gave up an early gain, sliding 6.49 points, or 0.1%, to 8,196.04. The Russell 2000 index of smaller company stocks dropped 7.13 points, or 0.5%, to 1,557.92.
The S&P/TSX composite index closed down 35.39 points at 16,527.90.
Associated Press, The Globe and Mail