S&P 500, Dow close at new highs
But the market is beginning to look overbought as oil prices and interest rates are on the move again. Google, Apple and Facebook boost the Nasdaq.
Yes, the Standard & Poor's 500 Index ($INX) topped 1,700 for the first time ever. The Dow Jones Industrial Average ($INDU) finished at a new high, with its best daily performance in more than three weeks. Facebook (FB) traded above its $38 IPO price for much of the day, but faded in late trading. Yelp (YELP) jumped 23%.
Fueling the rally were the Federal Reserve's signal on Wednesday, that it's not planning to push interest rates higher any time soon, and decent news Thursday on jobless claims and auto sales. In addition, the Institute for Supply Management's U.S. manufacturing index expanded at the fastest pace in two years in July, and China’s Purchasing Managers’ Index beat expectations.
But a number of technical and fundamental indicators are suggesting a short-term break is coming, including rising interest rates, oil prices and retail gasoline prices. Moreover, Thursday's good vibrations could dissipate if Friday's jobs report disappoints.
If a pullback materializes -- August can sometimes start one -- it's not clear if a slippage will turn into something worse. That probably will depend on two things: the economy and how the Federal Reserve reacts to it.
The Dow closed up 128 points to 15,628 -- a new closing high. Its high of 15,650.69 was an intraday high. The S&P 500 was up 21 points to 1,707, near its high for the day (and all-time intraday high) or 1,707.85. It's been flirting with the 1,700 level for nearly two weeks. Wednesday's high was 1,698.43.
The Nasdaq Composite Index ($COMPX) had jumped 49 points to 3,676, after hitting an intraday high of 3,674.13. Thursday's close was the best for the index since Sept. 28, 2000.
Thank Google (GOOG), which topped $900 for the first time since July 24; Apple (AAPL), up $2.78 to $455.31 and up 9% since its July 23 earnings report; and Facebook.
The rally was in fact quite broad: 24 of the 30 Dow stocks were higher, along with about 440 S&P 500 stocks and 86 stocks in the Nasdaq-100 Index ($NDX). The index was up 36 points to 3,126.
The consensus for Friday's job report is an unemployment rate of 7.6% in July, unchanged from June, and possibly 200,000 job gains.
Here are the headwinds that are building up:
Oil prices are rising.
Crude oil (-CL) in New York was up $2.64 to $107.67, its biggest percentage gain since July 10. Brent crude had gained $1.78 to $109.48. The 1.7% gain was the biggest since May 2.
Interest rates are higher.
The 10-year Treasury yield was at 2.695%, up from 2.593% on Wednesday and 1.6% in May. The Fed has said it plans to keep its key federal funds rate at ultra-low levels, but the bond market controls longer-term rates. When the Fed starts to taper -- or trim -- its monthly bond purchases, it's not clear how the bond market will react. A quick run-up in interest rates could stall a lot of economic activity.
Momentum indexes suggest stocks are nearing overbought levels.
The most important on Thursday was the MACD divergence line for the S&P 500. It dropped below zero on Thursday, typically a sell signal.
The headwinds are building, suggesting -- but not guaranteeing -- that a pullback is coming.
The market rally overall was fueled by industrial, financial and consumer discretionary stocks. Natural gas producer Pioneer Natural Resources (PXD) has been the big winner among S&P 500 stocks, up $20.29 to $175.15. It's as big player in natural gas production in shale regions. Chesapeake Energy (CHK) was the third best performer.
American Express (AXP) and Bank of America (BAC) are the best performers among the 30 Dow stocks. Caterpillar (CAT) and Boeing (BA) were also higher. Exxon Mobil (XOM) was the laggard, after reporting the worst quarterly profits since 2010.
More from Top Stocks
When you look at this index in totality, over the last 63 years, it is very obvious that something is wrong, and that something unnatural is taking place. And all of you index fund investors, who blindly contribute every month, might want to re-think your strategy.
Well said Romblebee and L_V! you're both 100% right. It's going to get ugly! Americans are not hurting enough yet, to pay attention to the most corrupt govt. in our lifetime, but they will, and soon. And I'm referring to both parties that are now one. Their intent is to collapse our economy, they have a much bigger agenda to fulfill!
Where was the National Debt and or Global Debt in 1985 compared to now. Commodities prices, etc,etc,etc. Regardless, at the end of the Day, it's more about Price to Earnings Rations and can companies sustain them. That's mean a hell of a ton more than worrying about spikes on a Chart. What was relative in 1910 might not be relative now. What was relative in 1950 might not be relative now. What was Relative in 1985 might not be relative now. We live in a dynamic global economy, not a static one. Things change, and sometimes in a very big way.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.