By the time the U.S. markets opened Tuesday morning, stocks had rallied in Europe in overnight trading after Ian McCafferty, a member of the Monetary Policy Committee from the Bank of England, provided assurance that the U.K. stimulus package could be expanded if necessary. U.K. bond prices rose, and interest rates fell, on the suggestion that potential stimulus measures would continue to hold interest rates lower for an extended period; bonds rallied around the globe on the news.
Stock prices continue to grind higher, though many have expected the stock market to drift sideways during the month of August, as earnings season winds down and investors take their last vacations for the summer. The technology, financial and consumer staples sectors helped the major market averages finish in positive territory on Tuesday, with the Standard & Poor’s 500 eking out 0.04 percent gain and the Nasdaq Composite higher by 0.24 percent.
On Tuesday, the Department of Labor released the Productivity and Costs report for the second quarter, which showed that productivity fell by 0.5 percent — the consensus was for an increase of 0.5 percent. Though this is typically not a market-moving report, it was the third declining quarter in a row, which is the longest negative streak in the history of this report, going back to just after WWII. Though Americans worked more hours, productivity was not affected. Specifically, the report showed that although unit labor costs rose 2.0 percent, the lack of business investment played the largest role in falling productivity for the nation.
As the major market averages are breaking out to new highs, some investors are calling for the end of the bull market. However, what some may be missing is that a rotation among sectors can refresh and renew an advance that may appear to be getting tired. This week, energy stocks are getting some relief after a four-day rebound in crude oil prices, but the more important sectors to watch are financial and technology. The financial sector seems to be strengthening as the probability of the Fed raising interest rates later this year has gone up, while the technology sector appears to be anticipating a surge in the economy.
For the week, the top-performing sectors were led by the Dow Jones U.S. Energy index, up 3.58 percent over the past five trading days, followed by the Dow Jones U.S. Financial index, higher by 2.66 percent, and the Dow Jones U.S. Technology index rising by 2.47 percent over the same period.