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London (CNN Business)If you’re asking why US stocks just hit an all-time high in the middle of a pandemic that’s triggered the sharpest recession in history, you aren’t alone.
What’s happening: The S&P 500, the broadest measure of the US stock market, notched a new closing record on Tuesday, erasing all its losses since February. The index has rallied more than 50% from its low point on March 23.
“It’s hard to believe, but the 2020 bear market is officially over,” Solita Marcelli, Americas CIO at UBS Global Wealth Management, wrote in a note to clients. The bear market officially lasted just over one month, making it the shortest ever, according to S&P Dow Jones Indices.
So what gives? Ultimately, investors have found it hard to bet against the unprecedented flood of stimulus spending unleashed by governments and central banks. And with interest rates at historic lows, those chasing returns are left with few alternatives to stocks. The tech giants still raking in cash have appeared especially attractive.
“Investors have little choice but to search for yield, and that means going for riskier assets even at a time when the global macro environment isn’t optimal,” Craig Erlam, senior market analyst at Oanda, told me.
Even holdouts have gotten on board in recent weeks. David Kostin, the chief US equity strategist at Goldman Sachs, told clients in late May that the stock market’s push higher was “unlikely to persist,” noting that the outlook for corporate earnings in 2021 and a smooth economic recovery could easily prove too optimistic. Kostin said he expected the S&P 500 to finish the year at 3,000 points.
But late last week, Kostin changed his tune, pointing to how the interest rate environment helps stocks. He now expects the S&P 500 to close out 2020 at 3,600, 6.2% higher than Tuesday’s close.
Not everyone is making money on the stock market rally. Norway’s wealth fund, the biggest in the world, said Tuesday that it lost $21 billion in the first half of the year. It had nearly 70% of its portfolio invested in equities.
While the fund’s biggest single-stock holdings are Microsoft (MSFT), Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL), which helped drive the market comeback, it was dinged by its stakes in banks and the oil and gas sector — a reminder that selectivity remains important even during a period of broad-based gains.
Two solid bets: Walmart (WMT) and Home Depot (HD), which both reported solid earnings on Tuesday as shoppers spent their stimulus checks, have soared this year, with shares rising 13% and nearly 31%, respectively. Target (TGT), whose stock is up a more muted 7%, reports Wednesday.
Trump gives Oracle his blessing for TikTok bid
Could Oracle (ORCL) beat out Microsoft (MSFT) to buy a chunk of TikTok?
That’s the big question after President Donald Trump indicated he could support a bid from Oracle. The Financial Times reported on Monday that Oracle cofounder Larry Ellison had held preliminary talks with TikTok’s Chinese owner, ByteDance, and was “seriously considering” acquiring the app’s operations in the United States, Canada, Australia and New Zealand.
“I think Oracle is a great company and I think its owner is a tremendous guy, a tremendous person,” Trump said Tuesday. “I think that Oracle would be certainly somebody that could handle it.”
The backstory: Microsoft had been out front in the race to purchase TikTok’s US operations. Trump has said he will ban the app in the country unless it finds an American buyer by September 15.
Trump reiterated on Tuesday that he believes the acquirer should make a payment to the US Treasury as part of a deal, a highly unusual request.
“I guess Microsoft wants it and so does Oracle. And probably so do other people. But they have to also make sure the United States is well compensated, because we’re the ones making it possible,” he said. “So our Treasury has to be very well compensated.”
It’s not clear that Trump has the legal authority to enforce such a kickback, which experts say could set a dangerous democratic precedent.
Investor insight: Microsoft shares have climbed more than 3% since it confirmed it was pursuing a TikTok deal early this month. Oracle’s stock rose 2.2% on Tuesday.
Amazon is doubling down on offices
As tech companies promote flexibility for employees over the next few years, many are also preparing for a future that involves physical offices — a sign that the work-from-home revolution accelerated by the pandemic may have its limits.
The latest: Amazon said Tuesday that it plans to hire 3,500 additional workers in cities across the United States, my CNN Business colleague Brian Fung reports. This move commits the e-commerce giant to a significant expansion of office space at a time when others in the industry are embracing telecommuting indefinitely.
Amazon will build out its offices in New York, Dallas, Detroit, Denver, Phoenix and San Diego, reflecting a $1.4 billion investment and more than 905,000 square feet of additional office space, the company said.
Facebook, which has previously said as much as half of its workforce could be working remotely within the next five to 10 years, is also expanding its physical footprint. This month, the company said it would lease 730,000 square feet in the old post office building at Penn Station in New York City.
These investments are likely long-term bets. The typical duration for office leases on spaces larger than 100,000 square feet is more than 12 years, according to Victor Calanog, head of commercial real estate economics at Moody’s Real Estate Solutions.
Lowe’s (LOW), Target and TJX (TJX) report results before US markets open. L Brands (LB) follows after the close.
Also today: The Federal Reserve’s minutes from its July meeting post at 2 p.m. ET.
Coming tomorrow: Economists surveyed by Refinitiv expect initial US jobless claims for the week ending August 15 to come in at 925,000. That would be the lowest level since the jobs crisis began in March.
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