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The S&P 500 and the Dow rose on Friday to close at record highs, posting a third straight weekly rise partly on a lift from growth stocks, with a late-day rally building gains ahead of 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 U.S. Treasury yield from a 14-month high hit in late March encouraged buying in growth.
Data showed U.S. producer prices increased more than expected in March, bringing the largest annual gain in 9-1/2 years.
Many investors now expect higher inflation as vaccine rollouts help the U.S. economy rebound from lockdowns, yet stocks showed little concern as the Federal Reserve has maintained it will allow inflation to overshoot its target.
“This is why all week long (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.”
The Dow Jones Industrial Average rose 297.03 points, or 0.89%, to 33,800.6, the S&P 500 gained 31.63 points, or 0.77%, to 4,128.8 and the Nasdaq Composite added 70.88 points, or 0.51%, to 13,900.19.
For the week, the S&P rose 2.71%, the Dow advanced 1.96% and the Nasdaq climbed 3.12%.
The banks kick off first-quarter earnings season next week with Goldman Sachs, JPMorgan and wells Fargo scheduled to report on Wednesday. Analysts expect profits for S&P 500 firms to show a 25% jump 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, Amazon and Microsoft, which are in the growth index, advanced to pace the S&P 500. Amazon shares rose 2.21% 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.
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.
A 3.24% gain in Honeywell helped lift the Dow as Jefferies and J.P. Morgan raised their price targets on the U.S. aero parts maker’s shares.
Volume on U.S. exchanges was 8.69 billion shares, compared with the 11.71 billion average for the full session over the last 20 trading days.
