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Aug 9, 2018

MARKETS I THE WALL STREET JOURNAL: Markets: Major Indexes Flirt With New Peaks

The Wall Street Journal.
Markets Bull logo.
Good morning. I'm Ben Eisen of The Wall Street Journal, your guide to markets this Thursday.
We get a bit more economic data today with the producer price index and jobless claims. We're also continuing to watch Tesla now that its leader's Tweets have attracted the attention of regulators.
Today, stock market reporter Michael Wursthorn looks at major stock indexes returning to record levels.

Markets in a Minute

Markets Data

Overnight Developments

  • European stocks weakened after Chinese shares rebounded from trade-driven losses. S&P 500 futures pointed to an opening rise.
  • Read our full market wrap here

Another Stock Market Gauge Topples Its Record

By Michael Wursthorn, stock market reporter
The S&P 500 has already hit a new recordwhen including dividends.
The benchmark’s Total Return Index, which includes dividends in the returns of the S&P 500, has moved higher at a faster pace in recent sessions to again surpass its January highs.
That’s an encouraging sign for the broad S&P 500 stock index, which has repeatedly flirted with record levels but remains about half a percentage point below its all-time high set Jan. 26. The S&P 500, which doesn't include dividends and is more closely followed by investors, is up nearly 7% in 2018, just shy of the 8.1% advance for the total return index.
In comparison, the technology-heavy Nasdaq Composite has hit repeated highs in the past two months, but the Dow Jones Industrial Average, which is more sensitive to trade tensions, is still 3.9% from its January high.
The total return index actually briefly breached its January record once before on July 25, but a slump in tech stocks following disappointing earnings reports from Facebook Inc. and Netflix Inc. pulled it back down. It’s been steadily climbing again since the beginning of the month.
A run-up in smaller-cap stocks in the index and continued strong performance among high-growth-oriented companies in the consumer-discretionary and tech sectors have played a big part in pushing the total-return benchmark higher over the past several months, said Bespoke Investment Group, which highlighted the outperformance of the total return index in a research note this week.
Earnings have also helped, as companies in the S&P 500 wrap up their third consecutive quarter of year-over-year double-digit profit growth. The S&P 500 total return index has gained 7.5% in the past three months alone, accounting for much of its gain for the year.
Those factors have helped to tamp down volatility, giving indexes a clearer path to move meaningfully higher. Escalating trade tensions and concerns over the Federal Reserve’s pace of interest-rate increase continues to occasionally spook the stock market, but the impact hasn’t been as detrimental as it was earlier this year when major indexes plunged into correction territory amid fears of a pickup in inflation.
Wall Street’s most well-known fear gauge, the CBOE Volatility Index, also known as the VIX, has been steadily falling to levels that haven’t been seen since early January.

Market Facts

  • The S&P 500 and Nasdaq Composite both finished Wednesday roughly 0.5% from new records.
  • Oil prices fell to their lowest level in more than six weeks Wednesday as U.S. stockpiles of oil and fuel hit a seven-month high.
  • On this day in 1995, the internet stock sector was born with a bang as 16-month-old Netscape Communications Corp. went public, issuing its IPO on the Nasdaq at an initial price of $28 per share.

Key Events

Jobless claims, due out at 8:30 a.m. ET, are expected to have inched up last week to 220,000.
The producer price index for final demand, also out at 8:30 a.m., is expected to have risen 0.3% from a month earlier in July.
Chicago Federal Reserve Bank President Charles Evans speaks at 9:30 a.m.
Wholesale trade inventories are expected to be flat versus the prior month in June. The data are due out at 10 a.m.
Government data on natural gas stockpiles, due out at 10:30 a.m., are expected to show a 47-billion cubic feet increase in the week ended Aug. 3, according to the average forecast of nine analysts.

Must Reads

A high-speed rail line under construction in north China's Hebei Province last month. China is fighting economic headwinds with an infrastructure push. PHOTO: XINHUA/ZUMA PRESS
China is hunkering down for a long trade fight. Beijing said it would match the U.S. step for step after the White House said it would impose new 25% tariffs on $16 billion worth of Chinese goods. China’s Ministry of Commerce released an updated list of items to target with similar tariffs that would go into effect the same day as the U.S. tariffs.
A Republican congressman was charged with insider trading. Prosecutors say Rep. Christopher Collins of New York tipped off his son about the confidential results of a drug trial so he could trade on it.
A discrepancy over Saudi oil data could rattle markets. Saudi Arabia, the world’s largest oil producer, is pushing back against analysts who estimate it increased production in July, a move that could put it in conflict with other members of the Organization of Petroleum Exporting Countries.
New York became the first U.S. city to put a cap on ride-hailing services. City council members froze new vehicle licenses for firms like Uber and Lyft for one year while the city studies the industry’s effects.

What We've Heard on the Street

"Of course, buyouts succeed or fail based on company fundamentals, not CEO bravado."
— Heard on the Street columnist Charley Grant

Stocks to Watch

21st Century Fox—Up 0.2%: The entertainment giant topped second-quarter earnings projections Wednesday. The results come after Fox and Walt Disney shareholders approved the acquisition of Fox in late July.
Tesla—Down 1.1%: The Securities and Exchange Commission is examining the veracity of CEO Elon Musk’s tweet Tuesday that he was considering taking the company private, as well as the use of Twitter for the disclosure.
Roku—Up 12%: The streaming service reported higher-than-expected earnings for the second quarter on Tuesday, and upped its full-year outlook. The company also announced a free web version of its Roku Channel service, which will feature advertisements.
Yelp—Up 15%: The company on Wednesday reported better-than-expected second quarter earnings and raised its revenue guidance for the year.
Booking Holdings—Unchanged: The online travel company put its second-quarter earnings results on hold Wednesday to “confirm certain business metrics,” it said, but called its financial results “finalized and ready.” The company had been scheduled to report at 4 p.m.

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