Many investors are expecting inflation to increase, but as the Fed has said it would allow inflation to overshoot its target, stocks were not affected much
The S&P 500 and the Dow on Friday rose to close at record highs, posting a third straight weekly increase partly on a lift from growth stocks, with a late-day rally building gains ahead of the quarterly earnings season next week.
Growth names have found their footing over the past two weeks after being outperformed by value stocks for most of the year. A pullback in the 10-year US Treasury yield from a 14-month high hit late last month encouraged buying in growth.
Data showed US producer prices increased more than expected last month, bringing the largest annual gain in nine-and-a-half years.
Many investors now expect higher inflation as COVID-19 vaccine rollouts help the US economy rebound from lockdowns, yet stocks showed little concern as the US Federal Reserve has maintained that it would allow inflation to overshoot its target.
“This is why all week long [US Chairman Jerome Powell] was jawboning, he made sure everyone understood they were expecting a spike and they are ready for it; it wasn’t a surprise,” said Ken Polcari, managing partner at Kace Capital Advisors in Jupiter, Florida.
“Which is why the market is not backing off, because he succeeded in jawboning the anxiety and stopped people from getting really panicked about it,” Polcari said.
The Dow Jones Industrial Average rose 297.03 points, or 0.89 percent, to 33,800.6, the S&P 500 gained 31.63 points, or 0.77 percent, to 4,128.8 and the NASDAQ Composite added 70.88 points, or 0.51 percent, to 13,900.19.
For the week, the Dow advanced 1.95 percent, the S&P rose 2.71 percent and the NASDAQ climbed 3.12 percent.
The banks launch first-quarter earnings season next week, with Goldman Sachs Group Inc, JPMorgan Chase & Co and Wells Fargo & Co scheduled to report on Wednesday.
Analysts expect profits for S&P 500 firms to jump 25 percent from a year earlier, according to Refinitiv IBES data. That would be the strongest performance for the quarter since 2018.
Megacap names such as Apple Inc, Amazon.com Inc and Microsoft Inc, which are in the growth index, advanced to pace the S&P 500. Amazon shares rose 2.21 percent as warehouse workers in Alabama rejected an attempt to form a union.
The Russell 1000 growth index, comprised largely of technology stocks, outperformed its value counterpart, made up mostly of cyclical stocks such as financials and energy names, for a second week following the pullback in longer-dated Treasury yields.
The Bank of America’s weekly fund flow figures showed investors have pumped more money into equities over the past five months than in the last 12 years.
Volume on US exchanges was 8.69 billion shares, compared with the 11.71 billion average for the full session over the past 20 trading days.
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