US STOCKS rallied on Friday (Jan 17) to close out a strong week on optimism over the health of the economy and path of interest rates as investors braced for a slew of policy changes under the incoming Trump administration.
The S&P 500 and Dow Industrials registered their biggest weekly percentage gains since early November and the Nasdaq recorded its best since early December. Data this week allayed fears that inflation would resurge while expectations have grown that the Federal Reserve will bump up the timing and magnitude of rate hikes this year.
The Commerce Department reported on Friday that US single-family homebuilding rose to a 10-month high although demand will likely be curbed by rising mortgage rates and an oversupply of new properties.
A separate report revealed a surge in manufacturing output last month.
President-elect Donald Trump will be inaugurated on Monday, when US markets will close for the Martin Luther King Jr Day holiday.
Uncertainty over the potential for some of Trump’s policies such as tariffs to rekindle rising inflation pressures and slow the path of Fed rate cuts has weighed on equities in recent weeks.
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But a solid start to the corporate earnings season with results from many big banks has also helped buoy stocks this week, with the S&P 500 bank index up nearly 7 per cent on 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.”
According to preliminary data, the S&P 500 gained 59.48 points, or 1 per cent, to end at 5,996.82, while the Nasdaq Composite gained 291.91 points, or 1.5 per cent, to 19,630.20. The Dow Jones Industrial Average rose 338.82 points, or 0.8 per cent, to 43,491.95.
The benchmark US 10-year note yield was little changed at 4.609 per cent, but has eased off a 14-month high of 4.809 per cent hit earlier this week.
Cleveland Fed President Beth Hammack said inflation remains a problem, as recent data has pointed to a resilient economy. However, Fed Governor Christopher Waller indicated on Thursday the central bank could cut rates sooner and faster than expected as inflation is likely to continue to ease.
The Fed is widely expected to keep rates steady at its policy meeting later this month, with the markets pricing in a greater than 50 per cent chance for a cut of at least 25 basis points until June, LSEG data showed.
Ten of the 11 S&P 500 sectors rose, led by a gain of more than 2 per cent in consumer discretionary stocks, while healthcare was the sole decliner.
Nvidia and Broadcom advanced after Barclays raised its price targets on the stocks, helping to boost the PHLX semiconductor index by almost 3 per cent.
In addition, Intel surged on speculation of a takeover and Qorvo shot up after activist investor Starboard Value disclosed a 7.7 per cent stake in the chipmaker.
Shares of social media firms such as Meta had a muted reaction after the Supreme Court ruled against TikTok’s challenge to a law that would force its app’s sale or ban in the United States. Meta shares rose modestly while Snap dipped. REUTERS
