U.S. stocks reach new high ahead of record bull market

Last Updated Aug 21, 2018 4:37 PM EDT

Shares rose in U.S. trading on Tuesday, pushing the market toward the milestone of the longest bull market in American history. 

The S&P 500 hit a record high of 2,873 just before 1:00 p.m. on Tuesday, beating by 1 point the previous record set on Jan. 26. It closed below its intraday high, at 2,863, representing a gain of 0.2 percent compared with Monday's closing price.

The Dow Jones industrial average rose 64 points, an increase of 0.3 percent, to 25,822.29 on Tuesday.

Unless the stock market drops significantly by the end of trading Wednesday, the bull market that started March 2009 will have lasted nine years, five months and 13 days. The long rally has added trillions of dollars to household wealth and boosted the economy. 

stocks-2009-now.png


Corporate profits, buybacks fuel gains

The most recent surge has been supported by strong corporate profits, helped by tax cuts and higher consumer spending. At the same time, corporations are spending more to buy back their own shares, which Trim Tabs Investment Research said will "smash previous records" in 2018. So far, U.S. companies have bought back $4.8 billion of their own shares each day this year, far above the previous record of $3.2 billion per day in 2007. 

Share buybacks help boost stock prices by reducing the number of outstanding shares traded in the market, which boosts per-share earnings and increases the ownership stake of current shareholders.  

Second-quarter corporate profits have generally been strong, with FactSet noting earlier this month that almost 8 out of 10 companies have reported earnings that exceeded analyst expectations.

"Investor spirits were also buoyed by strong earnings reports from some leading companies, highlighted by a blockbuster result from Walmart, whose sales surged at the fastest pace in more than a decade," Bob Schwartz, senior economist at Oxford Economics, wrote in a Friday research report. 

Federal Reserve

Minutes from the Federal Reserve's last policy meeting are due out Wednesday and could provide insights into the latest thinking on rate hikes at a time when President Donald Trump has been stepping up criticism of tightening by the U.S. central bank. The minutes will be followed by Fed chairman Jerome Powell's comments Friday to the annual conference of central bankers in Jackson Hole, Wyoming.

Trade tensions

Investors are closely watching for any prospects for an end to the trade dispute between the U.S. and China. The costly, dueling tariffs between them are causing uncertainty in global markets. Hopes rose late last week on news that China will send an envoy to Washington this month to discuss a way out of the standoff before President Donald Trump and Chinese President Xi Jinping meet in November.