After treading water for most of March and April, stocks are nudging deeper into record territory and are closing in on milestones with big zeros attached to them. The Dow Jones industrial average is within 30 points of 17,000 while the Standard & Poor's 500 is just shy of 2,000 after rising 6 percent this year.
A harsh winter in the U.S. that hobbled growth made investors cautious. There were also worries about the conflict in
But now the economy appears to be on track again and investors are rediscovering their appetite for stocks.
While 17,000 would be the first 1,000-point marker crested this year, the Dow had two in 2013. It closed above 15,000 for the first time on
That double milestone was a long time coming, though. The Dow had finished above 14,000 six years earlier, in
In 2014, here are some of the factors driving stocks toward new milestones:
Recent goods news on manufacturing and hiring has boosted confidence in the economy.
Manufacturing is expanding at a healthy pace and the service industry continues to grow, according to surveys released by the
U.S. employers added 217,000 jobs to their payrolls in May, the fourth consecutive month of solid job gains. The number of Americans filing for unemployment benefits has also dropped close to the levels seen before the outbreak of the Great Recession in
More jobs should put more money into consumer's pockets. That leads to greater demand and greater investment by companies, creating a virtuous circle, says
"It's in the early stages, but we're starting to finally see a snowball effect where everything builds on itself," Sorensen says.
Corporate profits are also rising. Earnings reports start to come in next month, and investors expect that second-quarter profits at U.S. companies will be up 5.4 percent from a year ago, according to FactSet.
The market for mergers and acquisitions is heating up. Although the number of corporate deals is marginally lower than it was at this point last year, the transactions getting done are bigger.
The value of corporate deals has surged 62 percent to
M&A deals lift stock prices because the acquirer typically pays a premium for the company that it's buying, and if there are multiple bidders, prices are pushed even higher.
The battle for
MORE CENTRAL BANK STIMULUS:
Central banks around the world can step in and try to bolster national economies that are struggling. The latest big move came in
When people expect lower prices, or deflation, they tend to put off purchases and investment, choking off growth. That is a disaster scenario the ECB wants to make sure does not happen.
As investors anticipated the ECB's move, a chain reaction was unleashed in the world's financial markets.
"Lower rates in
Investors bought European bonds, pushing down yields. That made U.S. Treasury note yields seem more attractive by comparison, luring buyers to the U.S. The yield on the 10-year Treasury note dropped from 3 percent at the start of the year, to as low as 2.44 percent
Lower long-term interest rates in the U.S. should support the economic recovery by keeping mortgage rates low and encouraging home-buying.
All these things should help U.S. stocks.
The ECB stimulus should support growth in
The stimulus is "the first tangible step that Draghi has taken to really drive European growth," says Lafferty.
THE WORLD OUTSIDE
A contraction in
Those worries have eased for now.
One place that could become a major problem for investors is
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