Dow hits record, cyclicals rise on jobless claims data

The Dow Jones Industrial Average hit a record high on Thursday, bolstered by an upbeat weekly jobless claims report, while shares of vaccine makers fell after President Joe Biden backed plans to waive patents on COVID-19 shots.


Seven of the 11 major S&P 500 sectors were trading higher, with communication services stocks (.SPLRCL) leading gains.


Facebook Inc (FB.O) jumped 5.8% to an all-time high after beating market expectations for quarterly revenue and profit, helped by a surge in digital ad spending during the pandemic and higher ad prices. read more


Apple Inc (AAPL.O), however, slipped 0.5% despite posting sales and profit ahead of Wall Street estimates on strong iPhone and Mac sales.


Shares of other high-flying stocks including Microsoft Corp (MSFT.O), Tesla Inc (TSLA.O) and Amazon.com Inc (AMZN.O) fell between 0.1% and 3.3%.


“Apple and Microsoft both had high expectations... while they did exceed consensus estimates, a lot of it was priced in, so there is some profit taking coming in,” said Thomas Hayes, chairman of Great Hill Capital.


Of the 265 companies in the S&P 500 that have reported so far, 86.8% have topped analysts’ earnings estimates, with Refinitiv IBES data now predicting a 44.7% jump in profit growth.


The S&P 500 (.SPX) and the Nasdaq (.IXIC) indexes had touched record highs earlier in the session.


“The market seems to be weaning just a little bit, we have seen stocks coming off their opening highs,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.


“We are seeing investors question now ‘can the momentum continue’ and at least for today it looks like not really.”


Meanwhile, U.S. economic growth accelerated in the first quarter, fueled by massive government aid to households and businesses, while a labor market report showed 553,000 people filed for unemployment benefits last week, compared with 566,000 in the prior period.


More earnings reports from Dow components rolled in, with Caterpillar Inc (CAT.N) falling 3.1% after warning of supply-chain bottlenecks. Drugmaker Merck & Co Inc (MRK.N) slid 5.1% after posting a drop in quarterly profit.


After a report that the Biden administration will propose a sharp increase to capital gains tax, while the dollar index gained as the euro and pound gave back some of the month’s gains.


Oil prices were little changed as concerns over Libyan output offset worries that rising coronavirus cases in India and Japan would cause energy demand to decline.


On Wall Street, indexes turned lower after a Bloomberg report that the Biden administration would propose to lift the capitals gains tax to near 40% for wealthy individuals, nearly double the current rate.


“If they’re going to tax people more and their net is going to fall, the value of that instrument is lower. Incentives matter,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.


“A lot of money that’s in the market at this point is non taxable, and I don’t think people do that calculation. Whenever they see news (like this), they just sell, they want to take the gains this year.”


The Dow Jones Industrial Average fell 394.34 points, or 1.16%, to 33,742.97, the S&P 500 lost 44.88 points, or 1.08%, to 4,128.54 and the Nasdaq Composite dropped 153.66 points, or 1.1%, to 13,796.56.


MSCI’s gauge of stocks across the globe shed 0.35% and the pan-European STOXX 600 index rose 0.68%. Emerging market stocksrose 0.28%.


MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.28% higher, while Japan’s Topix rose 1.82%.


Treasury yields fell alongside stocks on the capital gains tax issue.


Benchmark 10-year notes last rose 3/32 in price to yield 1.5539%, from 1.564% late on Wednesday, remaining in a tight range so far this week.


Oil prices were in and out of positive territory as traders weighed lower output in Libya with concern over demand from India, the third-largest global consumer.


“The market realized that a global comeback in oil demand cannot come without a comeback of the world’s largest economies,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy, noting “India is diving deeper and deeper into a major crisis with infections setting new records every day.”


U.S. crude rose 0.02% to $61.36 per barrel and Brent was at $65.30, down 0.03% on the day.


In currency markets, the dollar rose as the pound gave back some of its recent sharp gains while the euro was weighed by an ECB statement that was hopeful on the economic recovery but lacking in details about the stimulus removal.


U.S. Federal Reserve and Bank of Japan meetings follow next week.

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