Market Snapshot: Stock market hits new highs as Dow, S&P 500 aim to cap a record-setting week with a flourish higher

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U.S. stock rose at the start of trade Friday, with the major benchmarks reaching new intraday highs, after data on new U.S. home construction showed it surging to 13-year highs in December.

Investors were also parsing data that showed China’s economic growth picked up in December, though annual growth was the weakest in about three decades.

Gains have been mostly aided by an apparent detente between China and the U.S. and corporate quarterly results which have helped to extend the view that the U.S. will avoid a recession in 2020.

How are benchmarks faring?

The Dow Jones Industrial Average DJIA, +0.02% gained 64 points, or 0.2%, at 29,362, the S&P 500 index SPX, +0.09% rose 9 points, or 0.3%, at 3,321, while the Nasdaq Composite index COMP, -0.08% advanced 23 points, or 0.2%, to 9,380.

On Thursday, the Dow gained 267.42 points, or 0.92%, to 29,297.64, the S&P 500 advanced 27.52 points, or 0.84%, to 3,316.81, while Nasdaq Composite Index added 98.44 points, or 1.06%, to 9,357.13.

For the week, as of Thursday’s close of trade, the Dow and S&P 500 are on pace for their second straight weekly gain. The blue-chip gauge is up 1.6% for the week, on pace for its best weekly advance since Aug. 30. The S&P 500 is headed for a 1.8% gain for the week, which would mark its best return since the week ended Sept. 6. Meanwhile, the Nasdaq is on track for a 1.9% return for the week, which would mark its best return since the period ended Dec. 20 and its sixth weekly gain in a row.

What’s driving the market?

Wall Street is in rally mode, with sentiment boosted Friday morning by data on U.S. December housing starts that showed home constructing rising 16.9%, to annual rate of 1.608 million units, to the fastest pace since 2006.

That’s well above the consensus forecast of 1.375 million, according to a MarketWatch poll of economists. Permits for new construction, however, fell by 3.9% to an annual rate of 1.416 million units, down from a more than 12-year high in November, but below consensus expectations of 1.473 million.

“This read blows expectations out of the water,” Mike Loewengart, vice president of investment strategy at E-Trade wrote in an email. “Housing is one of the most critical metrics to gauge the health of the US economy, and combine this with the low interest rate environment and the future looks like it will continue to shine bright for home buyers.”

“Taking this in aggregate with the other fundamental reads we’ve seen this week, it’s hard to argue that this expansionary phase can’t keep going,” he added.

Investors optimism wasn’t dented by China reporting its worst annual growth in three decades of 6.1%. To be sure, the reading was in line with economists’ consensus expectations and many investors saw positive takeaways from the economic report from the world’s second-largest economy.

Indeed, China’s economic growth picked up in December, marking the fastest pace monthly expansion since last March.

“The data was in line with expectations but there were positive surprises from the monthly indicators, with both industrial output and retail sales beating the forecasts in December and pointing to a possible quickening in growth momentum towards the end of 2019,” wrote Raffi Boyadjian, senior investment analyst at XM Markets, in a daily research note.

Markets extended gains on Thursday on the back of the signing of the first phase of a Sino-American trade agreement in Washington but also investors got an added jolt after the Senate passed a revised trade deal between the U.S., Mexico and Canada.

George Mateyo, chief investment officer at KeyBank said that reduced trade tensions, indications by the Federal Reserve that rates will remain low for the foreseeable futures and earnings results that have so far come in better than expected have conspired to drive stocks consistently higher.

“Goldilocks is back,” he said, referring to economic conditions that are bullish for earnings growth but not hot enough to warrant central-bank interest rate hikes. “I think the housing numbers add to the case that economic growth might be stronger this year than people thought, in the mid two-percent range.”

In other economic data, the Federal Reserve reported that U.S. industrial production fell 0.3% in December, in line with expectations, according to a MarketWatch poll of economists. Capacity utilization fell to 77% in December, the second lowest reading in 27 months.

The number of open jobs fell sharply to 6.8 million in December, from 7.4 million the prior month, according to the Labor Department. Consumer sentiment declined in January, according the University of Michigans consumer sentiment index, which fell from 99.3 to 99.1, compared to the 99.6 reading expected by economists polled by MarketWatch.

Which stocks are in focus?

Google-parent Alphabet Inc. GOOG, +0.77% GOOGL, +0.80% just joined the $1 trillion club, closing above that market capitalization mark on Thursday. Shares of Google’s Class A gained 1% Friday.

Schlumberger SLB, +1.68%  shares were up 1.6% after the oil-services company reported fourth-quarter profit and revenue that exceeded expectations.

State Street STT, +4.57%  reported fourth-quarter earnings growth of 4.1%, revenue growth of 5% and decline in costs of 8.8% The company’s stock was moving 4.9% higher early Friday.

Shares of CSX Corp. CSX, -1.02%  fell 0.5% , after the railroad operator posted revenue in the fourth quarter that fell more than analysts had expected, in a Thursday afternoon release.

Gap Inc. GPS, -1.75%  shares were in focus after it announced late Thursday that it has cancelled plans to spin off its Old Navy brand. The retailer’s stock was down 0.5% Friday morning.

How are other markets trading?

In bond markets, the yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +1.45%  rose 3.8 basis points to 1.845%.

Crude oil prices were on the rise, with the cost of a barrel of West Texas Intermediate crude CLG20, +0.24%  for February delivery gaining 26 cents, or 0.4% to $58.77. In precious metals, gold GCG20, +0.39%  rose $5.90, or 0.2%, to $1556.40 an ounce.

The value of the U.S. dollar DXY, +0.31%  rose 0.2% relative to a basket of its peers.

In Europe, stocks were rallying, as reflected by a 1% gain for the Stoxx Europe 600 SXXP, +0.97%.

Asian stocks gained overnight, as the China CSI 300 000300, +0.14%  rose 0.1%, Japan’s Nikkei 225 NIK, +0.45%  added 0.5% and Hong Kong’s Hang Seng index HSI, +0.60%  advanced 0.6%.

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