Stocks finished higher on Friday, but not by much. Despite just inching forward, the S&P 500 advanced for the sixth consecutive week, and the Dow Jones Industrial Average penetrated 21,000 on Wednesday for a new high.
The gains in stocks were accompanied by lower bond prices as a “risk-on” attitude dominated the week. On Tuesday, Federal Reserve officials said that sometime in March, the Board is likely to raise rates. And on Friday Fed Chairperson Janet Yellen confirmed the possibility of a rate hike “as long as the economy evolves as expected.” The implied probability of an increase rose to 81.9%. It was generally felt that President Donald Trump’s speech to Congress on Tuesday evening buoyed optimism that the new administration’s policies would result in higher growth and that a rate increase would confirm that the Fed concurs with a forecast of higher economic expansion.
The financial sector rose 0.4% as a result of the potentially profitable impact of higher rates on banks’ bottom line. And the healthcare sector also rose 0.4%, pulled up by an increase in the oversold biotechnology group. The iShares Nasdaq Biotechnology Index (ETF) (NASDAQ:IBB) jumped 0.9%.
On Wednesday, the yield on the benchmark 10-year Treasury note jumped in one day from 2.36% to 2.46%, and from 2.32% on a week-ago-Friday.
At the close the Dow Jones Industrial Average rose 3 points to 21,006, the S&P 500 gained one point, closing at 2,383, the Nasdaq closed at 5,871, up 10, and the Russell 2000 fell 2 points to close at 1,394. The NYSE’s primary exchange traded 825 million shares with total volume of 3.5 billion shares, and the Nasdaq crossed 1.8 billion shares. On the Big Board, advancers had a slight lead over decliners, and on the Nasdaq, decliners held a small lead over advancers. Blocks on the NYSE fell to 6,586 from 6,797 on Thursday.
On Wednesday, while the Dow Jones was smashing records, the S&P 500 made a new high at 2,401. On Tuesday it fell slightly and its intraday high at 2,380 evolved into the bottom of Wednesday’s gap at 2,368 to 2,380. Friday’s intraday low covered part of the gap with a low of 2,375, and the chances are that since this is a continuation gap it will be fully closed.
Conclusion: Last week’s action was superbly bullish, even if Friday’s tape action, with average volume, indicated that active traders were taking profits earned earlier in the week. There is light support at 2,367, but the 20-day moving average at 2,343 and the 50-day at 2,300 are the next areas of solid buying.
The bull is charging and unless some unforeseen negative event occurs, expect more highs after a short consolidation by the major indices.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
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