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Dow Rises But Resilient Economy Fails to Boost the S&P 500

Last Updated September 23, 2020 1:15 PM
Josiah Wilmoth
Last Updated September 23, 2020 1:15 PM
  • The Dow jumped to a record high for a second straight day, but the S&P 500 struggled to tread water.
  • Strong economic data beat estimates and quieted recession fears.
  • The Dow received a particular boost from Boeing.

The US economy passed a critical test with flying colors, sending the Dow deeper into uncharted waters above the 27,500 level.

Shortly before the closing bell, the Dow Jones Industrial Average had rallied 88.26 points or 0.31%, lifting the index to 27,550.37.

dow jones industrial average chart, stock market today
The Dow prepares to close at a new all-time high for a second consecutive day. | Source: Yahoo Finance 

The Nasdaq and S&P 500 trailed the Dow, rising 0.16% and 0.03%.

Gold and silver suffered severe corrections. The gold price dropped more than 1.65% to $1,485, while silver’s 2.5% retrace reduced its value to $17.61. Platinum and palladium also trended lower, though copper managed to rise more than 1.2%.

Oil prices also rose more than 1%, responding positively to the news that Washington and Beijing might begin unwinding their tangled web of retaliatory tariffs. The US and China are the world’s two largest consumers of oil.

US Economy Passes Critical Test With Flying Colors

Today’s uneven market bounce didn’t earn a new self-congratulatory tweet from Donald Trump, but the president did retweet his post from yesterday touting the Dow’s race to a new zenith.

Perhaps that praise should have gone to the US economy, which survived a crucial test this morning. The ISM Non-Manufacturing Index, a leading indicator of the health of the services sector, beat economist estimates by a substantial margin, printing a 54.7 versus an expected 53.5.

Services account for around 80% of the overall economy, and recent data had provided a mixed picture of the sector’s integrity. While the outlook for US manufacturing remains fraught, today’s better-than-expected non-manufacturing reading suggests that the bull case for the broader economy remains intact.

ISM Manufacturing and Non-Manufacturing PMI points to slowdown, not recession
The outlook for US GDP growth points to a slowdown – but not a recession. | Source: Think ING

Writing at Think ING, Chief International Economist James Knightley said that today’s data dump confirms that although US growth is slowing, a recession does not appear to be imminent.

He says,

“[T]he manufacturing and non-manufacturing ISM readings are pointing to a slowdown in the rate of US growth, but are not signaling recession is imminent.”

Meanwhile, the trade war rumor mill continues to grind in the right direction, though nothing is certain until Trump and Chinese President Xi Jinping put the caps back on their pens at the “phase one” signing ceremony.

Elsewhere, stock market analysts continue to pound the drum on the dangers of a “Blue Wave” election in 2020. The latest warning comes from Paul Tudor Jones, who says that his employees believe the outcome of the presidential election could either spur a 15% rally in the S&P 500  if Trump wins – or a 25% plunge if he’s defeated by a progressive Democrat like Elizabeth Warren.

Dow 30 Stocks: Boeing Booms, Visa Flounders, and Walgreens Eyes an Exit

boeing stock, dow jones
Boeing stock helped lift the Dow further into record territory. | Source: ERIC PIERMONT / AFP

The Dow had its most heavily weighted component, Boeing, to thank for its second straight record-setting session. BA shares traded 2.5% higher after CEO Dennis Muilenberg offered to forgo his annual bonuses  and received a vote of confidence from the aerospace giant’s new chairman, Dave Calhoun. Investors also remain bullish on the day-old news that the 737 Max could return to service in Europe  during the first quarter of 2020.

McDonald’s stock rose 1.95% as investors came to grips with the scandal-linked departure of former CEO Steve Easterbrook.

The index’s top performer was Walgreens, whose shares surged 4.8% in response to a report that the company might pursue a deal that would take its stock private .

On the opposite end of the spectrum, Visa stock slid 1.5%, Home Depot stock dipped 1.4%, and Coca-Cola shares traded 1.2% lower.