S&P 500 clinches seventh successive record close, surpasses 4700 level intra-day

It was a strong end to a strong week for the S&P 500 and other major US equity indices. The S&P 500 clinched a seventh consecutive record close at 4697 after briefly surpassing the 4700 level intraday. The index ended the week up over 2.0% on the week, its best such run since June and is on course for five straight weeks in the green, the best run of weekly gains since August 2020. Out of the last 18 sessions, the S&P 500 has only seen 2 negative days. The Nasdaq 100 rose 0.1% and the Dow gained 0.6%.

Strong US labour market data, which appeared at the time to infuse markets with confidence in the strength of the US economic recovery, and positive news regarding a new, effective Covid-19 treatment were the two major news stories driving equities higher on Friday. With regards to the latter story, Pfizer announced that it was halting a trial of a new pill early due to overwhelmingly positive early data (90% reduction in deaths and hospitalisations in at risk adults, according to early findings) and would apply directly for emergency use authorisation.

Some analysts said the pill, which comes on the heels of a recently developed alternative pill from Merch with a 50% mortality rate reduction, would be a game-changer and enable the global economy to “live with the pandemic”. Pfizer shares were up 11% on the news, whilst pandemic-hit sectors like airlines and cruises operators also got a sizeable boost, amid optimism that better available Covid-19 treatments would boost consumer confidence and accelerate a return to their pre-pandemic holiday/travel habits. “Stay-at-home” stocks like Zoom and Netflix fell.

The positive jobs and Pfizer pill news comes on the back of a well-telegraphed QE taper announcement from the Fed earlier in the week, whose patient tone at the time with regards to rate hikes/policy tightening helped boost equities at the time. Earnings have also broadly been positive this week.

Some important US political themes are worth watching; the House of Representatives looks set to vote on and pass the $550B infrastructure spending package and a vote on Biden’s social-care package will likely follow soon after. By the end of next week, Biden’s economic agenda may have passed Congress and be signed into law, which could see the President’s faltering approval rating get a boost. President Biden is also soon likely to decide on whether he is going to renominate Fed Chair Jerome Powell, or whether he will pick a Democrat favoured candidates like Lael Brainard or Raphael Bostic. Powell is expected to secure the renomination, but if Brainard gets the nod, it could roil markets, as she is seen as more dovish.