Wall Street found its footing over the past week as a series of stronger-than-expected economic indicators helped the market pick up and return to its winning ways.
The blue-chip Dow Jones Industrial Average index advanced 1.27 percent in the week to close on Friday at 12,556.08 points, a record closing high.
The broad-market Standard & Poor's 500 ended the week at 1,430.73 points, gaining 1.49 percent. The tech-heavy NASDAQ composite leapt 2.82 percent for the week to 2,502.82.
The market has been surprised by better-than-expected economic news, prompting many economists to upgrade their growth projections.
A sharp drop in oil prices, which hit 19-month lows over the past week, also helped sentiment by easing inflationary pressures.
The US trade deficit was only slightly narrower than expected, but it showed a healthy rise in exports that will translate into improving economic growth.
Retail sales, a key component of economic activity, also topped forecasts with a 0.9 percent increase last month.
The data followed a January 5 report showing US employers added a healthy 167,000 new jobs last month.
"Almost every piece of recent economic data -- employment, unemployment claims, car and truck production, construction, and the ISM [Institute for Supply Management] indexes for both manufacturing and services -- has come in above expectations," analysts at First Trust Portfolios said.
"The economy ended 2006 with a full head of steam. Weakness in housing has not filtered through to the rest of the economy," they said.
Al Goldman, a chief market strategist at AG Edwards, said the positive market tone of last year has returned after the first week of the year was mixed.
"This has been a week of good upside momentum and I think that's probably going to continue into the early part of next week," Goldman said.
"The good news is we have good momentum. The bad news is the market is now short-term extended. And my feeling is sometime toward the end of next week, we'll probably start a little normal pause, and that will be healthy," he said.
One potential problem for Wall Street was that the strong economic growth meant the US Federal Reserve was less likely to deliver an interest rate cut that some market participants have been anticipating.
"Obviously, with consumer spending screaming along at this pace, the Fed will be all the more reluctant to ease anytime soon -- and the odds of them even shifting to a neutral bias in late January is now very close to zero," said Marc Levesque at TD Securities.
John Wilson at Morgan Keegan said some traders are "taking good news as bad news," but added:"I tend to take good news as good news, so the release [on retail sales] tells me that those responsible [consumers] for over 60 percent of GDP are feeling pretty good about the economy."
In the coming week, the market was to be closed for tomorrow's observance of the Martin Luther King Jr holiday. Afterwards, traders will be poring over earnings from major corporations including Intel, IBM, Apple and General Electric.
Most analysts expect companies to show growth, albeit unspectacular.
"I think the earning season is already in the market," Goldman said.
"One of the factors why the market is acting well is the assumption that fourth-quarter earnings were good. The important thing is the perception of earnings toward the end of the year," he said.
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