U.S. stocks closed higher again Friday, ending the week at new record highs, helped by more data suggesting the economy and corporate profits are in good health.
The rally this week has also been supported by at least a partial resolution of the U.S. – China trade dispute and the passage of the U.S., Mexico, Canada trade deal by Congress.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.17% gained 50.46 points, or 0.17%, to 29,348 while the S&P 500 index SPX, +0.39% rose 12.81 points, or 0.39%, to 3,329.62. The Nasdaq Composite index COMP, +0.34% advanced 31.81 points, or 0.34%, to 9,388.94.
On Thursday, the Dow gained 267.42 points, or 0.92%, to 29,297.64, the S&P 500 advanced 27.52 points, or 0.84%, to 3,316.81, while Nasdaq Composite Index added 98.44 points, or 1.06%, to 9,357.13.
For the week all three benchmark indexes posted their largest percentage gains since August 30 last year. The Dow has been up for five of the past six weeks, with a year-to-date return of 2.84%. The S&P 500 has been up for two consecutive weeks, with a year-to-date return of 3.06% and the Nasdaq has risen for six straight weeks, with a year-to-date return of 4.64%, according to Dow Jones Market Data.
What’s driving the market?
Wall Street is in rally mode, with sentiment boosted Friday by data on U.S. December housing starts that showed home constructing rising 16.9%, to annual rate of 1.608 million units, to the fastest pace since 2006.
“This read blows expectations out of the water,” Mike Loewengart, vice president of investment strategy at E-Trade wrote in an email. “Housing is one of the most critical metrics to gauge the health of the US economy, and combine this with the low interest rate environment and the future looks like it will continue to shine bright for home buyers.”
“Taking this in aggregate with the other fundamental reads we’ve seen this week, it’s hard to argue that this expansionary phase can’t keep going,” he added.
Investors optimism wasn’t dented by China reporting its worst annual growth in three decades of 6.1% though China’s economic growth picked up in December, marking the fastest pace monthly expansion since last March.
On Thursday stocks had extended gains after the signing of the first phase of a Sino-American trade agreement in Washington but also investors were also encouraged by Congress passing a revised trade deal between the U.S., Mexico and Canada.
George Mateyo, chief investment officer at KeyBank said that reduced trade tensions, indications by the Federal Reserve that interest rates will remain low for the foreseeable future, and earnings results that have so far come in better than expected, have all conspired to drive stocks consistently higher.
At the same time, stock market valuations have risen markedly in recent weeks, with the forward price-to-earnings ratio for the S&P 500 reaching 18.8, well above historical averages. “We’re getting into thin air, so we might get a pullback, Mateyo said. “The problem is everyone is waiting for it and when everyone is waiting for it tends not to happen.”
In other U.S. economic data, the Federal Reserve reported that industrial production fell 0.3% in December. Capacity utilization fell to 77% in December, the second lowest reading in 27 months.
The number of open jobs fell sharply to 6.8 million in December, from 7.4 million the prior month, according to the Labor Department. Consumer sentiment declined in January, according the University of Michigans consumer sentiment index, which fell from 99.3 to 99.1, compared to the 99.6 reading expected by economists polled by MarketWatch.
Which stocks are in focus?
Google-parent Alphabet Inc. GOOG, +1.98% GOOGL, +2.02% just joined the $1 trillion club, closing above that market capitalization mark on Thursday. Shares of Google’s Class A gained 2.02% Friday.
Schlumberger SLB, -1.06% shares fell 1.06% even though after the oil-services company reported fourth-quarter profit and revenue that exceeded expectations.
State Street STT, +1.75% reported fourth-quarter earnings growth of 4.1%, revenue growth of 5% and decline in costs of 8.8% The company’s stock was up 1.66% Friday.
Shares of CSX Corp. CSX, -0.44% slipped 0.44%% , after the railroad operator posted revenue in the fourth quarter that fell more than analysts had expected, in a Thursday afternoon release.
Gap Inc. GPS, -0.43% shares were in focus after it announced late Thursday that it has cancelled plans to spin off its Old Navy brand. The retailer’s stock was down 0.43% Friday.
Boeing Co. BA, -2.36% said Friday it is grappling with a new software headache before its 737 MAX can return to service, a problem industry and government officials said prevents the jet’s flight-control computers from powering up as required prior to flight. The stock fell 2.36%.
Shares of Qualcomm Inc. QCOM, +4.49% gained 4.49% after Citi Research upgraded the stock to buy from neutral and upped his price target to $108 from $89.
How are other markets trading?
In bond markets, the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +0.63% rose 2.5 basis points to 1.825%.
Crude oil prices were little changed,with the cost of a barrel of West Texas Intermediate crude CLG20, +0.50% for February delivery slipping 2 cents or 0.03% to $58.50.
In precious metals, gold GCG20, +0.44% rose $9.80, or 0.6%, to $1560.30 an ounce. West Texas Intermediate crude for February delivery CLG20, -0.15% was little changed, trading at $58.50 a barrel on the New York Mercantile Exchange, down 2 cents, or 0.03%, in Friday dealings after rising 1.2% on Thursday.
The value of the U.S. dollar DXY, +0.33% rose 0.3% relative to a basket of its peers.
In Europe, stocks were rallying, as reflected by a 0.96% gain for the Stoxx Europe 600 SXXP, +0.96% to 424.56.
Asian stocks gained overnight, as the China CSI 300 000300, +0.14% rose 0.1%, Japan’s Nikkei 225 NIK, +0.45% added 0.5% and Hong Kong’s Hang Seng index HSI, +0.60% advanced 0.6%.
