U.S. stocks flirt with record territory, on track for 4-day winning streak

Stocks rose Friday, with the Dow Jones Industrial Average briefly trading back above the 35,000 level, as investors weighed upbeat earnings reports versus worries about rising COVID-19 cases.

What are major indexes doing?

The Dow Jones Industrial Average DJIA, 0.35% was up 117.20 points, or 0.3%, at 34,940.55, and remains not far off its record closse of 34,996.18 from July 12.
The S&P 500 SPX, 0.45% rose 14.15 points, or 0.3%, to 4,381.63, after trading above its July 12 record finish at 4,384.63.
The Nasdaq Composite COMP, 0.32% was up 34.16 points, or 0.2%, at 14,718.75 after it also traded above its record finish in early activity.

On Thursday, stocks finished modestly higher, with the Dow DJIA, 0.35% rising 25.35 points, or 0.1%, to 34,823, while the S&P 500 SPX, 0.45% rose 0.2% and the Nasdaq Composite COMP, 0.32% advanced 0.4%.

What’s driving the market?

The Dow traded above 35,000 in early action, but saw gains trimmed after IHS Markit purchasing managers index readings. The U.S. composite output index fell to 59.7 in July from 63.7 a month earlier, a four-month low, reflecting a drop in the services index, though the manufacturing PMI rose to 63.1, a record for the series.

Meanwhile, technology stocks continued to curry favor with investors, with more positive earnings news late Thursday from Twitter and Snapchat parent Snap.

A strong performance by technology stocks has come amid concerns about the impact on the economy from rising numbers of cases of the highly contagious delta variant of coronavirus, notably in states that have seen lower vaccination rates.

“Investors are unsure what this update means for the economy’s recovery in the coming months. Investors should keep in mind that, at the height of the coronavirus pandemic, tech stocks provided a haven for distressed investors due to their higher-than-average earnings performance,” said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.

“Responding with the same strategy, investors are moving away from stocks positively correlated with economic cycles to tech stocks in an attempt to hedge their risk,” he said.

Investors were looking to the week ahead, which will feature a meeting of Federal Reserve policy makers and earnings reports from a number of tech heavyweights, including Tesla Inc. TSLA, -1.41%, Apple Inc. AAPL, 0.78%, Google parent Alphabet Inc. GOOG, 1.97% GOOGL, 1.97%, Microsoft Corp. MSFT, 0.74% and Amzon.com Inc. AMZN, 0.43%.

“From the names seen so far, U.S. quarterly earnings have come in predictably strong, but they haven’t blown the lights out, with a market trying to understand the macro, and downwardly revised global Q3 growth estimates,” said Chris Weston, head of research at Pepperstone, in a note. “That should change this coming week and corporate earnings will provide big opportunities on a stock level.

With a quarter of the S&P 500 index companies now reported, profit growth for the second quarter is expected to be 76%, compared to the second quarter last year during the worst of the pandemic, the best growth since 2009, according to Refinitiv. Profit margins have been sustained in the face of rising inflation. So far for the second quarter, companies are reporting average profit margins of 12.8%, above the historic range, according to S&P Global.

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Which companies are in focus?

Shares of Snap Inc. SNAP, 22.06% surged 24% after the social-media company late Thursday said it saw revenue more than double in the last quarter thanks to a continued rebound in the advertising market.
Twitter Inc. TWTR, 1.38% late Thursday said it swung to a profit in the second quarter, while revenue rose as the social-media company increased its share of active users. Share rose 1.5%.
Intel Corp. INTC shares fell 5% after the chip maker late Thursday reported results that topped expectations, but saw its outlook barely surpass the average forecast from Wall Street analysts.
American Express Co. AXP, 3.29% American Express topped earnings and revenue expectations Friday morning, while also pointing to an acceleration in spending and “robust” interest in its fee-based cards. Shares rose 4.7%.
Boston Beer SAM, -25.39% stock tumbled 24% after the maker of Sam Adams beer and Truly-branded alcoholic teas and seltzers, reported a second-quarter profit fall and earnings miss. Executives also slashed the annual forecast they had just lifted three months prior.
Shares of Honeywell International Inc. HON, -2.31% were down 1.3% after the aerospace and industrials company reported second-quarter profit and sales that beat expectations and raised its full-year outlook.

What are other markets doing?

The yield on the 10-year Treasury note TMUBMUSD10Y, 1.286% rose nearly 3 basis points to 1.287%. Yields and debt prices move in opposite directions.
The ICE U.S. Dollar Index DXY, 0.16%, a measure of the currency against a basket of six major rivals, rose 0.1%.
Oil futures edged lower, with the U.S. benchmark CL00, -0.36% down 0.4% to $71.60 a barrel, while gold futures GC00, -0.33% were off 0.3% at $1,793.80 an ounce.
In European equities, the Stoxx Europe 600 SXXP, 0.94% rose 1%, while London’s FTSE 100 UKX, 0.60% advanced 0.6%.
In Asia, the Shanghai Composite SHCOMP, -0.68% fell 0.7%, while the Hang Seng Index HSI, -1.45% fell 1.4%.