U.S. stocks closed out a strong week with rallies driven by optimism concerning the economy and interest rates. Investors anticipate policy changes under the incoming Trump administration. The Dow reached its biggest weekly percentage gain since early November, while the Nasdaq recorded its best performance since early December.
U.S. stocks surged on Friday, marking the completion of a strong week driven by optimism surrounding the economy's health and the trajectory of interest rates. Investors were preparing for a wave of policy changes under the incoming Trump administration. The Dow Industrials achieved its largest weekly percentage gain since early November, while the Nasdaq recorded its best performance since early December. This week's economic data alleviated concerns about a resurgence of inflation.
Expectations of the Federal Reserve accelerating the timing and extent of rate cuts this year also strengthened. The Commerce Department reported a 10-month high in U.S. single-family homebuilding on Friday, although rising mortgage rates and an oversupply of new properties are expected to likely curb demand. President-elect Donald Trump's inauguration on Monday, a day when U.S. markets are closed for the Martin Luther King Jr. Day holiday, is approaching. Uncertainty regarding the potential impact of some of Trump's policies, such as tariffs, on inflation and the Fed's rate cut path has weighed on equities in recent weeks. However, a positive start to the corporate earnings season, with strong results from several major banks, has also provided support to the stock market this week. The S&P 500 bank index rose by 7.41% over the week. 'Stronger growth, feeding into better corporate earnings, you're kind of getting off to a start to the year here that there's plenty of questions both in terms of fiscal and monetary policy and what the Trump agenda will look like, or what shape it will take,' said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Southfield, Michigan. 'Despite all those questions, we're starting the year on a reasonably better footing than we've been on perhaps in the last few years.'The Dow Jones Industrial Average rose 334.70 points, or 0.78%, to 43,487.83. The S&P 500 gained 59.32 points, or 1.00%, to 5,996.66, and the Nasdaq Composite increased 208.43 points, or 1.71%, to 12,226.22. For the week, the Dow rose 3.69%, the S&P gained 2.92%, and the Nasdaq climbed 2.43%. The benchmark 10-year U.S. Treasury note yield edged up 1.3 basis points to 4.619%, but has eased off a 14-month high of 4.809% hit earlier this week. Cleveland Fed President Beth Hammack stated that inflation persists as recent data indicates a resilient economy. However, Fed Governor Christopher Waller indicated on Thursday that the central bank could lower rates sooner and more aggressively than anticipated, as inflation is projected to continue easing. The Fed is widely expected to maintain rates steady at its policy meeting later this month. Market forecasts indicate a greater than 50% chance of a cut of at least 25 basis points by June, according to LSEG data. Nine out of the 11 S&P 500 sectors advanced, led by a 1.7% increase in consumer discretionary stocks. Healthcare and real estate declined. Meta shares edged up 0.24% while Snap dipped 3.21%. The S&P 500 recorded 24 new 52-week highs and no new lows, while the Nasdaq Composite registered 66 new highs and 73 new lows. Volume on U.S. exchanges was 14.57 billion shares, compared with the 15.65 billion average for the full session over the last 20 trading days
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