Markets

Stock Market Today: The Bear Is Dead; Long Live the Bull!

A small gain Tuesday was all the S&P 500 needed to surpass its Feb. 19 highs and confirm a new bull market.

It wasn't pretty, and it wasn't by much, but the S&P 500 officially exited bear territory on Tuesday and greeted a new bull market.

Stocks were helped out by U.S. housing starts, which jumped 22.6% month-over-month to a seasonally adjusted annual rate of just under 1.5 million.

Blerina Uruçi and Pooja Sriram of Barclays Investment Bank say three major factors are behind the recent pace: a return of pent-up demand, historically low mortgage interest rates and a shift as households move to the suburbs, but "pent-up demand is not likely to be sustained so we would not expect to see double-digit increases in starts on a sustained basis in the coming months."

"However," they say, "the direction of travel is upward in our view and we expect low mortgage rates and demand for suburban homes to continue pushing starts gradually higher in the coming months."

The earnings calendar, heavy on retailers this week, also spoke a little to the strength of the U.S. consumer.

Home Depot (HD, -1.2%), among 2020's hot housing market stocks, saw its most recent quarterly sales and profits surge 23% and 25%, respectively, to beat analyst estimates. Meanwhile, Walmart (WMT, -0.8%) reported that e-commerce traffic nearly doubled-year-over year and posted its biggest earnings surprise in more than three decades. But both stocks had little to show for it.

Instead, the market's strength yet again came from mega-cap tech and tech-adjacent names.

Amazon.com (AMZN, +4.1%) jumped after announcing it would hire 3,500 tech and corporate jobs in six cities, and spend $1.4 billion expanding its offices. Netflix (NFLX, +4.8%) and Google parent Alphabet (GOOGL, +2.6%) also made significant gains to push the Nasdaq Composite 0.7% higher to 11,210, yet another all-time high finish. The Dow Jones Industrial Average declined 0.2% to 27,778, and the small-cap Russell 2000 lost 1.0% to finish at 1,569.

The "broader market," however, finally got over the hump. The S&P 500 gained 0.2% to 3,389, surpassing its Feb. 19 all-time highs by a mere 3 points. That confirms a bull market for U.S. stocks that officially began off the March 23, 2020 bottom.

What's Next for the New Bull Market?

Sam Stovall, Chief Investment Strategist of U.S. Equity Strategy at CFRA, points out that "like the messenger from Marathon, bull markets typically (slump) from exhaustion an average of 2.5 months after reaching such a recovery milestone." However, the average declines have been modest, at 8%, before stocks resume their advances.

Even if that comes to pass, there's reason to believe a resulting climb would have fundamental help.

"Estimates for future quarters have tended to fall as earnings were being reported in previous seasons," says Jeffrey Buchbinder, Equity Strategist at LPL Financial. "This quarter was a different story, with a 1.4% increase in the next 12 months' S&P 500 earnings estimates since the second quarter ended, reflecting upbeat guidance from Corporate America.

"While that may not seem like much, and we still may not see positive earnings growth until early 2021, this encouraging development increases the chances that estimates for the third and fourth quarters may prove to be too low."

In the short term, look for potential dips in areas such as e-commerce stocks and artificial intelligence companies – these red-hot picks might be due for profit-taking should the market take a breather, allowing new investors to jump in and harness their longer-term potential.

But Wall Street's pros think several hot hands in 2020 still have more room to run. Here, we look at seven stocks that are already up anywhere between 24% and 260% year-to-date, but that the analyst community believes haven't quite reached their ceiling.

Most Popular

Where's My Refund? How to Track Your Tax Refund Status
tax refunds

Where's My Refund? How to Track Your Tax Refund Status

If you're waiting for your tax refund, the IRS has an online tool that lets you track the status of your payment.
March 2, 2021
Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your stimulus checks.
February 19, 2021
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021

Recommended

Stock Market Today 3/5/21: Tech Roller Coaster Leaves Investors Thrilled
Stock Market Today

Stock Market Today 3/5/21: Tech Roller Coaster Leaves Investors Thrilled

Stocks, especially tech, appeared poised for yet another bloodletting on Friday despite a stellar February jobs report. Then came the turn.
March 5, 2021
Stock Market Today 3/4/21: Crash? Not Today. But Stocks Still Feel Pain.
Stock Market Today

Stock Market Today 3/4/21: Crash? Not Today. But Stocks Still Feel Pain.

A small rise in weekly jobless claims and comments from Fed Chair Jerome Powell sparked a scare in stocks Thursday, though the losses could've been wo…
March 5, 2021
Stock Market Today 3/3/21: Growth Stocks Gashed
Stock Market Today

Stock Market Today 3/3/21: Growth Stocks Gashed

A stingier stimulus measure, conflicting news on the COVID front and upward creep in interest rates helped send growthier stocks to the cleaners Wedne…
March 4, 2021
Stock Market Today 3/2/21: Stocks Regress After Monday's Romp
Stock Market Today

Stock Market Today 3/2/21: Stocks Regress After Monday's Romp

Monday's euphoric stock-buying binge was put in check, with the major indices giving back some gains on a slow-news Tuesday.
March 2, 2021