The S&P 500 closed at a record again Wednesday, wrapping up a positive end to the first half of the year following a stronger private jobs report, with investors touting further market gains for remainder of the year.
The S&P 500 rose 0.20% to a record intraday level of 4,297.32 , and is up more than 15% for the year. The Dow Jones Industrial Average was up 0.61%, or 210 points, the Nasdaq was down 0.17%.
Private payrolls increased 692,000, beating the consensus estimate of 600,000, as the reopening of the economy drove up job gains in leisure and hospitality.
“The services jobs was very strong in the ADP report, which is consistent with the reopening in the U.S.,” John Ragard, senior portfolio manager, small cap equity at Spouting Rock Asset Management told Investing.com in an interview on Wednesday. "Airlines are hiring more pilots, hotel occupancy and hotel rates are increasing […] there's clearly a need for more people to come back into the services sector, especially into the travel and transportation industry.”
The bullish ADP numbers, while not completely correlated with the monthly payrolls report, do bode well for Friday’s jobs report, which will garner added attention following softer reports in April and May. Economists forecast the U.S. economy created about 600,000 jobs in June.
Cyclical stocks, which move in tandem with the economy, were higher, led by energy as oil prices rose ahead of the OPEC meeting on Thursday. Investors are betting that energy demand will outstrip supply ahead of a busy period of travel over the summer months.
“It is emerging that the unexpectedly robust recovery of demand will see a shortfall of up to 2 million barrels per day on the market in the second half of the year,” Commerzbank (DE:CBKG) said in a note.
Financials continued to add to recent gains, with major Wall Street banks trending higher.
Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), and Morgan Stanley (NYSE:MS) rose more than 1%.
Tech, meanwhile, took a breather from its recent melt-up even as bond yields remained sluggish amid expectations that inflation and growth may have peaked.
Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT, Apple (NASDAQ:AAPL), Facebook (NASDAQ:FB) and Amazon.com (NASDAQ:AMZN) were mostly lower.
“The bond markets are telling us that growth is decelerating [amid] some recent inflation data points that have been relatively soft." Ragard said. "I'm not saying that we won't still see some surprising inflation numbers, month to month [...] but I do believe that the growth rates have peaked."
Still, the overall market will continue to grind higher in the second half of the year with greater corporate productivity expected to push earnings higher.
"I think the market will continue to gradually drift higher, driven by the relative strength of company's earnings and cash flows," Ragard said. The pandemic impact and the labor shortage has forced companies to spend money on technology including automation, driving up the productivity gains, which ultimately will boost margins and earnings growth.
"Companies are finding ways to make capital decisions mostly with technology to get good rates of return on their investment and faster paybacks," Ragard added. "This is enhancing their profit margins and will help to offset some of the headwinds with inflation and the [expected] deceleration of economic growth," Ragard added.