S&P 500 hits record high, economic boom expected

Markets rose on Monday.

The S&P 500 rose 1.4 percent to a record high and the Nikkei 225 rose 0.8 percent.

European markets were closed for a holiday.

Following the strong US jobs report on Friday, the Institute for Supply Management reported on Monday that its non-manufacturing activity index jumped to a reading of 63.7 last month, the highest level in the survey’s history.

“A ‘Capital V’ recovery that is in the early innings,” said Tony Dwyer, Canaccord Genuity’s chief market strategist.

Indeed, with some economists expecting the US economy to boom over the next couple of months, there could be increasing pressure on the Federal Reserve to defend its super-easy monetary policy.

“They’re going to go through the gauntlet now,” said Jim Caron, head of global macro strategy at Morgan Stanley Investment Management. “The second quarter is going to be plus 10% growth and inflation is going to get to core PCE around 2.5%, and they’re going to say, ‘this is transitory.’”

“The market is pricing a lot of rate hikes,” said Michael Schumacher, director of rates at Wells Fargo. “The question then is, what does Powell do?”

“This is the market saying we’re getting ahead of the Fed,” said Peter Boockvar, chief investment strategist at Bleakley Advisory Group. “The market is going to drag the Fed into a tightening at some point.”