The Dow and the S&P 500 were off their highs in early afternoon in New York, but still advanced substantially from where they left off from the rally at the end of last week, with the Dow rising 0.54% or 82 points to 15,217.
The NASDAQ 100 did not fare as well, being slightly down on the day, with chipmaker Intel slipping nearly 4%.
The market rallied on Friday following the release of strong payroll data, but that was the day after the US Independence Day holiday when volumes were lower than normal. The good news to take away from today’s gains is that there has been consolidation of Friday’s reaction to the data, suggesting that the mindset is fairly widespread of accepting strong economic data as being positive for the market, despite the increased chance of a reduction to the Fed’s quantitative easing.
We have seen several signs that the US economy continues to grow, albeit at a modest pace, and we are now on the cusp of seeing what that means for the leading companies in America, with Alcoa reporting tonight after trading on Wall Street finishes.
Alcoa is generally taken as being the company that kicks off earnings season, being the first Dow Jones component to report each quarter, and in the next few weeks there will be a flurry activity as we hear second-quarter earnings from the biggest companies in America.
Despite the strong rally this year, the price to earnings ratios of S&P 500 companies are not high by historical standards, with earnings having grown in step with the rising share prices.