Turnaround on Wall Street as S&P index hits new high | Business
Wall Street’s rapid recovery from its Covid-19 slump has entered a new phase after a leading yardstick of American shares briefly hit a record high.
In early trading in New York the S&P 500, which measures the stock market valuation of the 500 leading US quoted companies, rose to 3,394.82, exceeding its previous high by a single point.
The remarkable turnaround means that shares have risen by 50% since their trough in late March, a period when countries around the world, including the US, were going into lockdown.
Since then, support from the US Federal Reserve has boosted stock market sentiment despite a steady stream of poor economic news, including a near-10% contraction in the American economy in the second quarter of 2020.
Much of the rise in the S&P 500 has been the result of the strong performance of a handful of high-profile companies such as Google, Amazon and Facebook, who have enjoyed a boom in demand during the lockdown.
Having at last broken above its previous peak after several near misses over the past week, the S&P fell back to 3,387 by midday in New York, up just 0.1% on the day.
Neil Wilson chief, market analyst at Markets.Com in London, said: “My instinct is that this is too high, it looks massively overbought. I mean, it’s not sustainable looking at the earnings. I think it’s mainly the liquidity being pumped into the system. As we get closer to the [US presidential] election I’d expect more volatility and a pullback.”
The news from Wall Street came as Norway’s sovereign wealth fund – the world’s biggest – made a £16bn loss in the first half of the year and warned that financial markets could face further volatility as the Covid pandemic was still out of control.
While investor confidence had been restored by “massive” state support packages, the deputy chief executive for the £895bn fund, Trond Grande, said financial markets were not reflecting the real economic impact of the virus, which he said was not under control “in any shape or form”.
He said: “We have already seen some sort of V-shaped recovery in the financial markets. I think there is a slight disconnect between the real economy and the financial markets.”