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

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
4 Strategies to Reduce Taxes in Retirement
retirement planning

4 Strategies to Reduce Taxes in Retirement

Don’t let the possibility of higher taxes in the future sink your retirement income plan. Consider these four ways to help manage your taxes, keeping …
May 31, 2021
12 Housing Stocks to Ride the Red-Hot Market
investing

12 Housing Stocks to Ride the Red-Hot Market

The U.S. has a housing shortage and a love affair with home improvement, both of which could create tailwinds for this group of housing stocks.
June 8, 2021

Recommended

Stock Market Today 6/15/21: Stocks Slip on Mixed Economic Data Dump
Stock Market Today

Stock Market Today 6/15/21: Stocks Slip on Mixed Economic Data Dump

While the major market indexes closed in the red, oil prices climbed to levels not seen since late 2018.
June 15, 2021
The 16 Best Value Stocks for the Rest of 2021
value stocks

The 16 Best Value Stocks for the Rest of 2021

Value stocks have been en vogue this year. These names could see upside as the U.S. economy continues to recover from the COVID-19 pandemic.
June 15, 2021
Stock Market Today 6/14/21: Nasdaq Notches New High on Late Tech Push
Stock Market Today

Stock Market Today 6/14/21: Nasdaq Notches New High on Late Tech Push

Adobe, Apple and Netflix were among Monday's strong performers that helped lift the Nasdaq past its April highs.
June 14, 2021
Why You Need a Roth IRA
Roth IRAs

Why You Need a Roth IRA

With this indispensable savings tool, your money grows tax-free, you can invest in almost anything and you get several cool perks.
June 14, 2021