US stock market surges to new high

Optimism has abounded on Wall Street in spite of soft economic data, propelling the S&P 500 to a new record high.

The leading US stock index benchmarks have all rallied strongly today, with the Dow Jones and S&P 500 both rising more than 1%. By early afternoon in New York, the Dow was up 1.15% or 185 points at 16,388, while the S&P 500 rose 1.09%, setting a new all-time high of 1858.70 along the way.

These gains, pushing the S&P 500 into positive territory for the year, reflect a significant amount of faith on the part of investors that the US economy is stronger than recent data suggests. Once again today, economic indicators disappointed, with soft readings from Markit’s services PMI and a couple of Federal Reserve surveys.

The flash Markit’s services PMI came in at 52.7 for February, down from January’s reading of 56.7. While still on the right side of the 50-mark that separates growth from contraction, this is the slowest growth in the services sector since the Federal government shutdown of last autumn. This is the latest in a long series of reports that seems to have been dragged lower by February’s frigid weather conditions.

The Chicago Fed’s National Activity Index slipped to -0.39 last month, down from -0.03 in December (originally reported as 0.16), with production the hardest-hit component, dropping to -0.36 from a positive level of 0.06 in the month prior. Similarly, the Dallas Fed’s regional survey shows overall business activity slowing to 0.3 in February from the prior level of 3.8, although the production index, a gauge of manufacturing activity in Texas, advanced to 10.8 from 7.1 as output picked up pace.

The stock market’s rally today suggests the mind-set persists of dismissing disappointing data as the transitory product of bad weather.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.