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Stocks Once Again Climb To New Record Closing Highs - U.S. Commentary


After showing a strong move to the upside in morning trading on Friday, stocks remained firmly positive throughout the afternoon. With the upward move, the major averages once again climbed to new record closing highs.

The major averages ended the day just off their highs of the session. The Dow advanced 228.46 points or 0.9 percent to 25,803.19, the Nasdaq climbed 49.28 points or 0.7 percent to 7,261.06 and the S&P 500 rose 18.68 points or 0.7 percent to 2,786.24.

For the week, the Dow surged up by 2 percent, while the Nasdaq and the S&P 500 jumped by 1.7 percent and 1.6 percent, respectively.

The continued strength on Wall Street partly reflected optimism about the earnings season after financial giants JPMorgan Chase (JPM), BlackRock (BLK) and Wells Fargo (WFC) all reported better than expected quarterly results.

JPMorgan and BlackRock moved notably higher after reporting results that beat estimates, although Wells Fargo moved to the downside.

Traders were also digesting some closely watched economic data, including a report from the Commerce Department showing retail sales rose in line with economist estimates in the month of December.

The Commerce Department said retail sales increased by 0.4 percent in December after climbing by an upwardly revised 0.9 percent in November.

Economists had expected retail sales to rise by 0.4 percent compared to the 0.8 percent increase originally reported for the previous month.

Excluding auto sales, retail sales still rose by 0.4 percent in December after jumping by 1.3 percent in November. The increase in ex-auto sales also matched estimates.

A separate report from the Labor Department showed consumer prices rose by less than expected in December, reflecting a sharp pullback in energy prices.

The Labor Department said its consumer price index inched up by 0.1 percent in December after climbing by 0.4 in November. Economists had expected prices to rise by 0.2 percent.

Meanwhile, the report said core consumer prices, which exclude food and energy prices, increased by 0.3 percent in December after ticking up by 0.1 percent in November. Core prices had been expected to rise by 0.2 percent.

Sector News

Gold stocks showed a significant move to the upside on the day, with the NYSE Arca Gold Bugs Index surging up by 3 percent. The index reached its best closing level in three months.

The strength among gold stocks came amid a notable increase by the price of the precious metal, as gold for February delivery jumped $12.40 to $1,334.90 an ounce.

Airline stocks also extended the substantial upward move seen over the two previous sessions, driving the NYSE Arca Airline Index up by 1.7 percent. With the jump, the index reached its best closing level in over sixteen years.

Significant strength was also visible among retail stocks, as reflected by the 1.7 percent advance by the Dow Jones Retail Index. The index climbed to a record closing high.

The gains by retail stocks came following the retail sales data as well as a report from the National Retail Federation showing stronger than expected holiday sales growth.

Software, brokerage, and computer hardware stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday. China's Shanghai Composite Index inched up by 0.1 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent. However, Japan's Nikkei 225 Index bucked the uptrend and dipped by 0.2 percent.

The major European markets also moved to the upside on the day. While the French CAC 40 Index climbed by 0.5 percent, the German DAX Index and the U.K.'s FTSE 100 Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries climbed well off their worst levels but still closed modestly lower. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 2.1 basis points to 2.552 percent after reaching an intraday high of 2.594 percent.

Looking Ahead

Following the long, holiday weekend, earnings news is likely to be in focus next week, as the reporting season starts to pick up steam.

Citigroup (C), UnitedHealth (UNH), Bank of America (BAC), Goldman Sachs (GS), Morgan Stanley (MS), and IBM (IBM) are among the companies due to report their quarterly results next week.

Reports on industrial production, housing starts, consumer sentiment, and regional manufacturing are also likely to attract attention.

The Federal Reserve is also due to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts.

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