Wall Street Reaches a Record


The S&P 500 climbed to a record on Tuesday, reaching a level few would have predicted a few months ago, and defying the economic storm facing the United States.

The index rose only slightly, but it was enough to eclipse a high reached in February, before the fast-spreading virus set off a staggering decline in stock prices.

The recovery has been fueled by trillions of dollars pumped into financial markets by the Federal Reserve and enormous spending by the government to protect American workers and businesses from the worst of the downturn.

A run-up in shares of technology giants that, because of their sheer size, hold sway over the entire market has also propelled the stock index. Put together, these factors drove a recovery that was so quick that the bear market — defined as a drop of more than 20 percent — that began earlier this year turned out to be the shortest ever, according to records going back to 1929.

The high on Tuesday comes despite the drastic economic toll of the virus, which dragged the American economy into one of the steepest downturns since the Great Depression, crushed corporate earnings and sent unemployment soaring.

Investors have largely shrugged off such concerns, and focused instead on economic updates that have not been quite as catastrophic as expected.

Last week’s retail sales data showing that Americans kept shopping in July, even as coronavirus infections continued to spread, was followed on Tuesday by strong earnings reports from Walmart and Home Depot. Separately, the Commerce Department said that construction of new homes in the United States surged nearly 23 percent in July, to the highest annual pace since February.

That focus on the good news has helped lift the S&P 500 by more than 50 percent from its low point in March.

Technology stocks have played a big role in those gains. Companies such as Apple, Alphabet and Microsoft have attracted investors despite the deep downturn in the United States, with buyers betting that those companies are poised to thrive in a stay-at-home economy and emerge from the crisis in an even stronger competitive position.

On Tuesday, Amazon was the best-performing stock in the S&P 500, rising 4 percent, with shares of a number of other technology companies — including Adobe and Salesforce — also climbing.

Still, the march higher has also meant that investors have looked past a number of risks that lie ahead. Most prominent among them this week is the inability of lawmakers in Washington to reach a consensus about another economic aid package.

Another is the latest escalation in tensions between the United States and China. The Trump administration said Monday that it would restrict the ability of the Chinese tech giant Huawei to buy a wider array of chips made or designed with American equipment and software.

Credit…Gabby Jones for The New York Times

The S&P 500 closed at a record on Tuesday, a remarkable display of investor optimism in the face of a still-shambolic American economy.

But aside from standing as testament to the sunny disposition of stock market investors, the record high also confirms the transfer of power from Wall Street’s pessimists — or “bears” — to the “bulls” who see more gains ahead.

Simply put, the record on Tuesday confirms that American investors are in a bull market again. We say ‘confirmed’ because the start of the bull market is actually traced back to when stocks hit rock bottom — which means it has been going on since March.

There’s no science behind the system for determining the start or end of a bull or bear market. It’s just tradition.

By that tradition, entry into a bear market is confirmed once stocks have fallen 20 percent from their high. That happened in mid-March, after the market crashed as the coronavirus crisis slammed the United States.

A bull market has its own criteria. Even though stocks were already up more than 50 percent from their lowest point (hit on March 23), some market traditionalists say that the bull market is only confirmed once stocks close at a record. That’s what just happened.

Why does any of this matter? Because markets often operate as something of an experiment in mass psychology. There’s a symbolic value to whether commentators, the news media and even the president are able to describe the context of the market as good or bad.

The last bull market grew out of the ashes of the 2008 financial crisis, with the S&P 500 beginning its run in March 2009, and rising more than 300 percent in almost 11 years.

That doesn’t mean the current bull market will last as long. The last one was about twice as long as usual. But this one is just getting started.



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