By Matthew Kochen,
Money & Investing Writer
On Tuesday, April 19, the S&P 500 index broke past the 2,100 point barrier, just about 24 points shy of its record high of 2,134.74 in May. The index reached its highest point of 2,110.29 at 3pm. There has been a strong upward trend since February when the index was at low in 1800’s range.
There were several apparent drivers for this boom, but the primary catalysts driving stock prices were better than expected earnings reports and rising oil prices. Public companies were very recently required to publish their earnings for the first quarter of the fiscal year. Investors were pessimistic in their predictions of what the earnings would turn out to be.
The first quarter earnings of S&P 500 companies were expected to fall on average 7.5 percent and revenue by 1.3 percent according to Thomson Reuters I/B/E/S. “Investors are very focused on revenue,” said Chuck Self, Chief Investment Officer of iSectors “After all the cost cutting over the past five years, now we need to start seeing revenue growth.” Stock behemoths like Johnson & Johnson (NYSE: JNJ) delivered just that with an uptick in sales.
Johnson & Johnson’s stock rose 1.8 percent to $112.94 per share on the day, but the bigger winners were the large banks. The most influential was Goldman Sachs (NYSE: GS), which also rose 2.28 percent to $161.98. Additionally, Bank of America (NYSE: BAC) grew 2 percent and JP Morgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Morgan Stanley (NYSE: MS), and Citigroup (NYSE: C) all rose 1.5 percent respectively.
This peak set 37 new 52-week record highs for companies and no new lows. Of the ten major S&P industry sectors, eight rose led by energy by 1.29 percent and materials at 1.59 percent The NASDAQ also saw 45 highs and 7 lows, although the NASDAQ Composite posted a 0.13 percent decline on the day to 4,953.45 as the technology sector lagged.
Dragging down the NASDAQ was a 25 percent fall in Illumina (NASDAQ: ILMN) to $133.81.
Concurrently, the largest forcing impeding S&P 500 growth was IBM (NYSE: IBM), which fell 5.6 percent to $144 because of its worst quarterly profit in 14 years. Also down was Netflix (NASDAQ: NFLX) at 10 percent to $97.52 as they failed to meet forecasts.
The other main catalyst for driving the S&P 500 up this high was a rise in crude oil prices.
A new report showing that U.S. inventories grew less than expected and Kuwaiti strike helped drive the price up by 2 percent. On Wednesday, the U.S. Energy and Information Administration reported crude oil supplies has only grown by 2.1 million barrels compared to the 3.1 million barrels that was report by the American Petroleum Institute the day before.
The oil output of OPEC’s fourth-largest producer was depressed as Kuwaiti oil workers went on strike to protest to pay and benefits cuts.
The output capacity of Kuwait is 3 million barrels a day. This was a brief respite from the global oversupply of oil. Prices of crude oil have fallen 27 percent in the past year and according to the International Energy Agency, worldwide supply surpassed demand by 1.5 million barrels a day in the first quarter.
AT publication, the S&P 500 index had slipped below the 2,100 threshold to end the trading day at 2,091.48.
It will be interesting to see if the index continues to slip or hold steady as the effect of higher than expected earnings reports wanes and oil output once again reaches capacity.
A version of this article appeared in the Tuesday, April 26th print edition.
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