Stocks added to their recent gains Friday, driving the S&P 500 and Dow Jones Industrial Average to new highs.
The S&P 500 rose 0.4%, led by gains in companies that rely directly on consumer spending, health care stocks and banks, which benefited from higher Treasury yields. The benchmark index notched its fourth straight weekly gain.
The gains were tempered by modest declines in technology stocks, which have been prone to pull back when bond yields move higher. Rising bond yields tend to make shares in technology companies that have had a strong runup over the past year look too expensive. Crude oil prices slipped, weighing down energy companies.
Bond yields rose broadly after falling earlier in the week. The yield of the 10-year Treasury note rose to 1.59% from 1.53% late Thursday. Still, bond yields are down from the highs they hit earlier in the month, when the 10-year note traded at a yield of 1.75%.
“There’s sort of a churning with regard to interest rates and in the market itself,” said Tom Martin, senior portfolio manager with Globalt Investments.
The S&P 500 rose 15.05 points to 4,185.47. The Dow gained 164.68 points, or 0.5% to 34,200.67. The S&P and Dow also hit all-time highs on Thursday. The technology-heavy Nasdaq inched up 13.58 points, or 0.1%, to 14,052.34 after recovering from an early slide.
The Russell 2000 index of smaller companies added 5.60 points, or 0.2%, to 2,262.67.
Stocks have rallied in recent weeks amid a string of encouraging reports on hiring, consumer confidence and spending that point to an accelerating U.S. economy. COVID-19 vaccinations and massive support from the U.S. government and Federal Reserve are fueling expectations for solid corporate profit growth as more businesses reopen after being forced to close or operate on a limited basis due to the pandemic.
The last round of stimulus from the government helped lift retail sales, and investors now have to weigh other proposals in Washington, which include investments in infrastructure and potential tax changes.
“Market participants are just trying to figure out, given the stimulus that’s already in the market, how do we handicap these next couple of rounds,” Martin said.
Investors also continue to be focused on the global economic recovery. China’s economy expanded at a sizzling annual pace of 18.3% in the first quarter of the year, the government reported Friday. The world’s second-largest economy contracted, as most of the world did, during the first months of the pandemic.
Homebuilder stocks moved broadly higher Friday after the Commerce Department said that U.S. home construction rebounded strongly in March to the fastest pace since 2006, as builders recovered from an unusually frigid February. The report also showed that applications for building permits, a good sign of future activity, increased by 2.7% to a seasonally adjusted annual rate of 1.77 million units. D.R. Horton rose 3.6% and KB Home gained 3.3%.
The rally in builder stocks helped power the S&P 500’s consumer discretionary sector’s gains, while Pfizer was among the big winners in the index’s health care sector, notching a 2.6% gain.
Technology and communication services stocks fell modestly. Apple slipped 0.3% and Facebook dropped 0.5%.
Several companies rose after reporting solid earnings. Paint and coatings maker PPG Industries jumped 8.7% for the biggest gain in the S&P 500 after handily beating Wall Street’s first-quarter profit and revenue forecasts. Other standouts include J.B. Hunt Transport Services, which rose 1.4% after reporting solid financial results.
The market is heading into the busiest two weeks of the earnings reporting season. Expectations are high for companies to show they are recovering from the pandemic or have roadmaps to show when profits will return. Dozens of companies will report next week, including Coca-Cola, Johnson & Johnson, Verizon Communications, Dow Chemical and American Airlines.