S&P 500 Seeks to Extend Winning Streak

By Anna Isaac and David Benoit

The S&P 500 edged higher Wednesday, on course for a fourth consecutive record, buoyed by data pointing to a U.S. economic recovery.

The broad stock-market index climbed 0.7%. The Dow Jones Industrial Average turned slightly higher, up 0.1%.

The Nasdaq Composite was also poised to extend its recent record streak, up 1.4%, as tech stocks followed soon-to-be Dow component Salesforce higher.

Volatility in U.S. stocks has been muted through much of August, with many investors and traders taking summer vacations in the U.S. and Europe. The Cboe Volatility Index, a closely watched gauge of turbulence in U.S. stocks, has in recent days been at its lowest since before the coronavirus pandemic capsized markets.

Investors have grown confident in recent weeks that the Federal Reserve and other major central banks will continue to bolster the economy by holding short-term interest rates low and buying government bonds and other forms of debt. That is pushing yields on sovereign debt, considered among the safest assets to own, below expected inflation levels. It's also prompted investors to look for higher returns in riskier assets, like equities.

Data on Wednesday showed orders for durable goods in the U.S. surged 11.2% in July, more than double the expected gain. Orders for defense aircraft and motor vehicles drove the spending higher, but even without those volatile categories the figures exceeded forecasts.

Stats like the surge in durable goods will likely feed investors who are confident the recovery is continuing, said Tobias Levkovich, the head U.S. equity strategist at Citigroup.

Earlier in the week, he bumped higher his dour target for the S&P 500 for the year, saying central bank support and investor appetite made it more likely stocks would remain elevated, even if there are questions about the health of the economy. He cautioned the data is still coming off lows, but said investors are paying closer attention to acceleration.

"The markets are following momentum right now because it is a sign of progress," he said. "But at some point we have to look at the absolute levels."

He's recently started calling it FOMU -- the fear of meaningfully underperforming.

In bond markets, the yield on the benchmark 10-year U.S. Treasury note edged up for a third day in a sign that investors' risk appetite is improving. It rose to 0.707%, from 0.680% Tuesday. It briefly hit 0.721%, its highest in intraday trading in almost two weeks, according to Tradeweb.

"There's still trillions of dollars on the sidelines in money-market funds. It needs to be deployed and the only real home for it is equities, " said Edward Park, deputy chief investment officer at Brooks Macdonald.

Markets are anticipating fresh cues on the health of the U.S. economy and potential changes to monetary policy on Thursday, when Fed Chairman Jerome Powell is expected to signal shifts to the central bank's approach to managing inflation at the annual Jackson Hole Economic Policy Symposium.

Investors are also watching the progress of Hurricane Laura as it gathers strength and churns toward Texas and Louisiana. It is expected to strengthen to a Category 4 storm and forecast to produce a life-threatening storm surge, extreme winds and flash flooding over eastern Texas and Louisiana, the National Hurricane Center said at 5 a.m. ET.

Brent crude, the international oil benchmark, edged slipped 0.04% to $46.27 a barrel, while U.S. crude prices rose a few cents to $43.40. Stockpiles of fuel are high due to the pandemic's impact on demand, potentially minimizing the disruption on energy prices from the storms. Gasoline futures, which on Monday surged to their highest level since early March, fell 1.2% Wednesday.

The energy and utility sectors in the S&P 500 both declined and refineries were being closed. Baker Hughes and Hess dropped about 3%, while Chevron and Exxon Mobil weighed on the Dow, both off more 1%.

"It's too early to tell if there's going to be major economic damage yet, " said Mr. Park. "At the moment, it seems to be playing out over concerns over the oil price, rather than a border impact on the equity market."

Tech stocks were once again driving the market higher.

Shares of Salesforce jumped 26%. The business-software provider posted record quarterly sales and raised its guidance after the closing bell on Tuesday, showcasing the sustained appetite for cloud-computing services during the pandemic. The company will be added to the Dow Jones Industrial Average at the start of trading Monday.

The stocks that have led the way for much of the year were rallying again as well, with Netflix and Facebook up 8% and 5.5%, respectively.

Shares of Dick's Sporting Goods climbed 11% after the retailer said its e-commerce sales nearly tripled in the quarter ended Aug. 1, offsetting temporary store closures and more than doubling its profit from a year ago.

One of the year's darlings, Moderna rose 6% after disclosing it had new data on its experimental coronavirus vaccine that showed promising signs for older patients. The stock is up 260% this year.

Overseas, the pan-continental Stoxx Europe 600 edged up 0.5%. In Asia, major stock gauges ended the day on a mixed note.

Write to Anna Isaac at [e-mail] and David Benoit at [e-mail]