Stocks Rally To New Record Closing Highs – U.S. Commentary

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(RTTNews.com) – After closing mixed for two consecutive sessions, stocks showed a significant move to the upside during trading on Friday. With the rally on the day, all three of the major averages reached new record closing highs.

The major averages saw further upside going into the close, ending the session at their best levels of the day. The Dow advanced 223.92 points or 0.9 percent to 26,616.71, the Nasdaq spiked 94.61 points or 1.3 percent to 7,505.77 and the S&P 500 jumped 33.62 points or 1.2 percent to 2,872.87.

With the rally on the day, the major averages moved sharply higher for the week. The Dow surged up by 2.1 percent, while the Nasdaq and the S&P 500 soared by 2.3 percent and 2.2 percent, respectively.

The strength on Wall Street partly reflected a positive reaction to the latest earnings news, with shares of Intel (INTC) moving sharply higher after the semiconductor giant reported fourth quarter results that exceeded analyst estimates.

Industrial conglomerate Honeywell (HON) also moved to the upside after reporting better than expected fourth quarter results and raising its full-year earnings guidance.

On the U.S. economic front, the Commerce Department released a report showing slower than expected economic growth in the fourth quarter, but economists recommended looking past the headline number.

The report said real gross domestic product increased by 2.6 percent in the fourth quarter compared to the 3.2 percent growth seen in the third quarter. Economists had expected GDP to climb by 3.0 percent.

While the pace of GDP growth slowed more than expected, final sales climbed by 3.2 percent and final sales to domestic purchasers jumped by 4.3 percent.

“In other words, despite the weak headline, this is not a weak report,” said Chris Low, chief economist at FTN Financial.

A separate report from the Commerce Department showed a much bigger than expected increase in durable goods orders in the month of December.

The Commerce Department said durable goods orders spiked by 2.9 percent in December after surging up by an upwardly revised 1.7 percent in November.

Economists had expected durable goods orders to climb by 0.8 percent compared to the 1.3 percent jump that had been reported for the previous month.

Excluding an increase in orders for transportation equipment, durable goods orders rose by 0.6 percent in December after edging up by 0.3 percent in November.

Ex-transportation orders had been expected to climb by 0.5 percent compared to the 0.1 percent drop originally reported for the previous month.

Traders were also reacting to President Donald Trump’s highly anticipated speech at the World Economic Forum in Davos, Switzerland.

Trump touted the progress made by the economy and the stocks markets since his election and reiterated his pledge to put “America first.”

“But America first does not mean America alone,” Trump said. “When the United States grows, so does the world.”

Sector News

Semiconductor stocks saw substantial strength on the day, with the Philadelphia Semiconductor Index jumping by 3.3 percent. The index rebounded after moving sharply lower over the two previous sessions.

Intel led the sector higher, although Maxim Integrated Products (MXIM) also posted a standout gain after meeting second quarter earnings estimates.

Considerable strength was also visible among pharmaceutical stocks, as reflected by the 2.4 percent gain posted by the NYSE Arca Pharmaceutical Index. With the gain, the index reached its best closing level in well over two years.

AbbVie ( ABBV ) posted a particularly strong gain after reporting better than expected fourth quarter results and raising its 2018 guidance.

Healthcare stocks also showed a significant move to the upside, driving the Dow Jones Health Care Index up by 2.1 percent. The advance lifted the index to a record closing high.

Computer hardware, software, internet, and railroad stocks also moved notably higher, reflecting broad based buying interest on Wall Street

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index dipped by 0.2 percent, while Hong Kong’s Hang Seng Index surged up by 1.5 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the French CAC 40 Index advanced by 0.9 percent, the U.K.’s FTSE 100 Index climbed by 0.7 percent and the German DAX Index rose by 0.3 percent.

In the bond market, treasuries pulled back following the upward move seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 2.662 percent.

Looking Ahead

Next week’s trading may be impacted by reaction to the Federal Reserve’s monetary policy announcement scheduled for next Wednesday.

The closely watched monthly jobs report is also likely to attract attention along with reports on personal income and spending, consumer confidence, pending home sales, and manufacturing activity.

On the earnings front, McDonald’s (MCD), Pfizer (PFE), Boeing (BA), AT&T (T), Facebook (FB), Microsoft (MSFT), DowDuPont (DWDP), Amazon (AMZN), Visa (V), and Exxon Mobil (XOM) are among a slew of companies due to report their quarterly results next week.


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