NEW YORK, Aug. 25 (Xinhua) -- The S&P 500 crossed above 2,000 points in intraday trading on Monday and ended just fractions below that level to set its 29th record close of this year.
The benchmark index set a new all-time high of 2,001.95 points earlier in the session before finishing at a record closing high of 1,997.92 points, up 9.52 points, or 0.48 percent.
The last time when the S&P 500 cleared a millennial number was 16 years ago when it toppled 1,000 points.
Although the round-number level is more of psychological significance, investors still perceived that as an encouraging milestone for the U.S. stock market which entered the sixth year of the current bull cycle since 2009.
Traders attributed the rally to a couple of reasons. First of all, the market has been grinding around 2,000 points and trading in a tight range over the past three weeks, held in check by the anticipation of what central bank leaders are going to say at the economic symposium in Jackson Hole, Wyoming last Friday, Kenneth Polcari, director of NYSE floor division at O'Neil Securities, told Xinhua on Monday.
The record run of the S&P 500 followed a cross-board rally in European equities Monday as European Central Bank (ECB) President Mario Draghi said Friday that the ECB is willing to push more accommodative monetary policy as the continent suffers stagnant economies.
The market also benefited from a relatively dovish tone set by U.S. Federal Reserve Chair Janet Yellen in her speech in Jackson Hole. "She didn't say anything new. She reiterated what everybody knew," Polcari said.
Moreover, "there was zero geopolitical stuff over the weekend in terms of any blowups between Russia and Ukraine, or Gaza and Israel," Polcari added.
Keith Bliss, senior vice president at brokerage Cuttone & Co., said that one of the reasons the S&P 500 hit 2,000 points is that the market got vastly oversold at the end of July on escalating geopolitical tensions. This trade is "very technically related, nothing fundamental," he said.
Fundamentally, however, the very good earnings season of U.S. companies in the second quarter underpinned the market, he added.
With just one week left in August, volume remained thin on Wall Street. "When you have very low volume, market's moves get magnified one way or the other," Bliss told Xinhua.
Bliss noted that weak economic data in the U.S. and Europe and geopolitical tensions around the world were "counterbalanced" by a Fed that is still willing to maintain accommodative monetary policy. "It's a bad idea to fight the Fed," he said.
Bliss noted that in a zero interest rate environment, "capitals are going to flow into the U.S. equity market" where investors can find some yield or return.
Data released on Monday by the Commerce Department showed that U.S. new home sales slipped 2.4 percent in July to a seasonally adjusted annual rate of 412,000, missing analysts' expectations.
Moreover, U.S. services sector output in August rose at the slowest pace since May, according to preliminary data released by financial data firm Markit. The seasonally adjusted Markit Flash U.S. Services Purchasing Managers' Index registered 58.5 in August, down from 60.8 in July.
Last but not least, merger and acquisition deals provided support for the stocks' rally. Swiss pharmaceutical giant Roche said Sunday that it would pay 8.3 billion U.S. dollars to acquire California-based biotech company InterMune, Inc. in an effort to expand the former's respiratory product portfolio. InterMune shares soared 35.41 percent to 72.85 dollars per share on Monday.
Burger King is reportedly in talks to buy Canadian coffee-and-doughnut chain Tim Hortons in hope to create the world's third largest fast food restaurant company headquartered in Canada for tax inversion purposes. Burger King shares jumped 19.51 percent to 32.40 dollars apiece.
TO CONSOLIDATE AT 2,000 BEFORE MOVING HIGHERh "Two thousands represented one of those emotional, as well as technical overhead resistance points," said Bliss. "The market is going to try and consolidate around that level, and for it to go higher, it's going to have to get above 2,000 and stay there for a few days for it to continue its march higher."
The three major stock indices have rebounded 4.5 percent to 5 percent from their lows on Aug. 7, "that's a very big run especially when you are at all-time highs, so you'll see some resistance built in because people will start taking positions off, taking some profit," Bliss said.
Bliss pointed out that the market is about to enter "traditionally one of the seasonally strongest periods in the equity markets," which is between the U.S. Labor Day on Sept. 1 and the end of the year in a mid-term election year.
If the market gets into that period relatively unscathed and things remain calm globally, Bliss believes the market will continue their slow growing higher.
Bliss said he wouldn't be surprised to see the S&P 500 finish the year at somewhere around 2,030 points and 2,035 points.
According to Polcari, what the S&P 500 piercing 2,000 points really means is that "investors feel good about where we are in the recovery, that they are buying into the fact that the recovery, albeit slow, seems to be steady."
"On the S&P, I think it's going to be somewhere between here and 2,050 points" by the end of this year, predicted Polcari.
"I think what you have to look for is after Labor Day when the world really comes back to work," he said, adding that he thinks the market may churn a little bit, pull back, fill in and build its foundation in the near term.
When asked whether the U.S. stock market is in a bubble condition, Polcari said sectors such as high-growth companies and social media names might be ones that are closer to a bubble, but he doesn't think the blue-chip industrial names are in a bubble at all.