Dow turns lower, but Wall Street on track for weekly gains

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By William Watts and Sunny Oh

All three major U.S. stock indexes closed at record highs Friday, as investors eyed the prospect of more financial aid from Washington to boost the economic recovery, while coronavirus cases are falling and vaccine distribution ramps up.

The indexes have risen for two consecutive weeks, led by the energy sector, with crude oil prices at 12 month highs, and by the financials sector, helped by rising long term U.S. bond yields.

The U.S. stock market is closed Monday for the Presidents Day holiday. (link)

For the week, the Dow rose 1%, the S&P 500 gained 1.2%, and the Nasdaq picked up 1.7%.

Stocks inched higher helped by optimism about another large fiscal stimulus package from Congress, as the coronavirus vaccination rollout picks up steam, and as quarterly corporate earnings reports impressed analysts.

“It’s boring to say but it’s so true. The most important thing to investors is keeping an eye on virus control and vaccine distribution. If that goes off the rails, everything gets thrown into turmoil,” Brandon Pizzurro, portfolio manager at Guidestone Capital Management, told MarketWatch.

Equities showed little reaction to the University of Michigan’s consumer sentiment index, which unexpectedly fell to a six-month low (link), reflecting pessimism about financial security, especially among lower-income Americans.

It’s why analysts see the prospect for further stock market gains tied to expectations that Congress will approve another round of aid spending closer to President Joe Biden’s $1.9 trillion proposal.

A House committee on Thursday approved half of Biden’s relief plan (link), advancing $1,400 payments to millions of Americans alongside other measures opposed by Republican lawmakers. Treasury Secretary Janet Yellen called (link) for further fiscal support in a virtual meeting with G7 finance ministers and central bank governors.

The U.S. is on pace to exceed Biden’s goal of administering 100 million vaccine doses in his first 100 days in office, with more than 26 million shots delivered (link)in the past three weeks. Roughly 34.7 million out of some 331 million Americans have received at least their first dose of vaccine, according to the CDC. In the past week, an average of 1.62 million doses a day were administered. Biden on Thursday said the U.S. will have enough COVID-19 vaccine by the end of the summer to inoculate 300 million Americans (link).

Corporate earnings have also been a positive factor, analysts said. As of Thursday, fourth-quarter earnings per share surpassed prior year levels and four-quarter rolling EPS are now expected to hit records in the second quarter, said Jonathan Golub, chief U.S. equity strategist at Credit Suisse, in a note.

Though stock-market valuations were on the higher-end of historical levels, the potential of U.S. large-capitalization businesses to post a sharp bounceback in profits meant markets were not as “frothy” as trading in individual stocks might suggest, said Lori Heinel, deputy global chief investment officer at State Street Global Advisors, in an interview.

“The U.S. has the biggest likelihood of achieving its earnings estimates,” said Heinel.

Trading activity was subdued though Friday. Much of Asia was closed due to holidays, while U.S. investors were preparing for a three-day weekend. U.S. markets will be closed Monday for Presidents Day (link).

-William Watts; 415-439-6400;


(END) Dow Jones Newswires

02-12-21 1635ET

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