After spending the first two weeks of January in the red, the S&P 500 pushed into record territory by a nose as Apple (AAPL), Microsoft (MSFT), General Electric (GE) and JPMorgan (JPM) helped drive the benchmark higher.
Associated Press The S&P 500 gained 0.5% to 1,848.38 today–a new all-time high by just 0.02 points– while the Dow Jones Industrial Average rose 108.08 points, or 0.7%, to 16,481.94, although the blue-chip index is still down 0.6% this year. The small-cap Russell 2000 advanced 0.7% to 1,170.95 and is now up 0.6% in 2014.
The S&P 500′s bigger stocks did the heavy lifting today. Apple jumped 2% to $557.36 today after its CEO made positive comments about the company’s deal to sell the iPhone with China Mobile (CHL), while Microsoft rose 2.5% to $48.27, and General Electric advanced 1.4% to $27.34. Bank of America (BAC) finished up 2.3% at $17.15 after beating earnings forecasts, while JPMorgan gained 3% to $59.49 in a delayed reaction to its own earnings release yesterday.
Today, stocks were given a boost by two pieces of economic data. The Empire State Manufacturing index, a gauge of industrial activity in the New York region, rose to 12.5, the highest since 2012. The so-called core producer-price index rose 0.3% in December, the largest increase since 2012.
Jefferies’ Thomas Simons calls the manufacturing data “encouraging.” He writes:
Manufacturing PMIs, Fed surveys, and other sentiment indexes have recently shown evidence that the sector is gaining traction, but strength is mixed across the various regions. This is the first regional report for the month of January so it is encouraging to see a high level of optimism heading into the New Year. The Empire survey has set the tone for a strong month of manufacturing indexes.
Newedges’ Annalisa Piazza explains that investors shouldn’t fret about inflation. She writes:
Despite today’s higher-than-expected PPI print, we rule out the Fed will change its assessment on inflation at its next FOMC meeting in late January. Inflationary pressures remains well subdued and the Fed looks beyond the short-term volatility, judging the stability of inflation expectations as a favourable factor for a gradual reduction of the current QE programme.
Societe General’s Albert Edwards ponders why markets refuse to acknowledge the risk of deflation. He writes:
Markets remain stoic about the risks of outright deflation in the US and eurozone for one very simple reason – they simply do not believe a recession that would trigger outright deflation is on the horizon. Quite the reverse – they believe with all their heart that we are at the start of a self-sustained recovery. That is despite the fact that the US recovery is already noticeably longer than average, and that the classic signs of old age, such as rapidly slowing productivity growth and stagnant corporate profits, can clearly be seen…
And however much US and eurozone policy makers deny we are witnessing a repeat of what happened in Japan in the 1990s, it does indeed look just like Japan to me.
I can guarantee–almost no one is thinking about that right now.
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