US stocks enjoyed a week of solid gains following a batch of good economic data and mostly strong corporate earnings, as concerns about geopolitical hotspots ebbed somewhat.
For the week, the Dow Jones Industrial Average leaped 338.31 points (2.03 percent) to 17,001.22.
The broad-based S&P 500 advanced 33.34 (1.71 percent) to 1,988.40, while the tech-rich NASDAQ Composite Index jumped 73.62 (1.65 percent) to 4,538.55.
Worries over Ukraine geopolitics returned to markets on Friday, when Russia sent a convoy of trucks into Ukraine without authorization. The action was condemned by Kiev and drew threats of fresh US sanctions.
However, analysts said the market’s overall upward bent this week showed worries had receded after violence in Iraq, and tit-for-tat sanctions between the West and Russia over Ukraine had earlier triggered fears of economic havoc.
“The probability of either the Iraq situation or the Ukraine-Russia situation turning into something that’s massively disruptive for the global economy is pretty small,” Wells Fargo Advisors senior equity strategist Scott Wren said.
“The upward trend for the market has resumed,” Kenjol Capital Management portfolio manager David Levy said. “Unless there is something new that frightens the market, then the bias is higher.”
The week’s economic data were generally strong. Highlights include a big pickup in existing-home sales, a jump in housing starts, lower unemployment claims, weak consumer inflation and a strong improvement in the Conference Board’s index of leading economic indicators.
Minutes from the US Federal Reserve’s monetary policy meeting last month showed an intensifying debate on how much the labor market has tightened and how that would impact inflation and the timing of the Fed’s plan to raise benchmark interest rates.
On Friday, Fed Chair Janet Yellen told a gathering of central bankers in Jackson Hole, Wyoming, that while there has been some improvement in the labor market, the US jobs market still has not fully recovered from the Great Recession.
Analysts said both the minutes and Yellen’s speech suggested the US central bank had not accelerated its timeframe for raising benchmark interest rates, currently expected in the second half of next year.
Earnings from retailers generally left investors pleased.
“People are feeling much better about retail going into the holidays in a few months and that’s helping to support better market tone,” Wedbush Securities managing director of equity trading Michael James said.
Standout reports came from Dow component Home Depot, which beat earnings expectations by a wide margin and raised its profit forecast for this year, citing strong sales. Other strong reports came from home-improvement retailer Lowe’s, teen fashion house American Eagle, apparel chain Gap, sporting equipment retailer Dick’s Sporting Goods and TJX, which owns apparel retailers Marshalls, TJ Maxx and other discount retail chains.
Target, which sells low-priced clothing, groceries, housewares and other goods, reported a nearly 62 percent decline in second-quarter earnings to US$234 million, but some analysts were heartened by the discount chain’s commentary that US sales had picked up in the latter part of the quarter.
Other major corporate news stories last week included Bank of America’s nearly US$17 billion settlement with the US Department of Justice and other authorities to resolve charges it misled investors on mortgage-linked securities.
Discount retailer Family Dollar rejected a US$9.7 billion proposed takeover by Dollar General, citing concerns the tie-up could run afoul of US anti-monopoly rules. Family Dollar said it continued to endorse a US$9.2 billion bid by Dollar Tree.
Hertz faced new scrutiny from activist investor Carl Icahn, who disclosed an 8.5 percent stake in the company and signaled plans to push for a shakeup at the slumping car-rental giant.
Analysts expect light trading volumes next week as many on Wall Street take vacation ahead of the Labor Day holiday on Sept. 1.
However, the calendar does include a handful of important economic reports, including the second estimate for second-quarter US economic growth, durable goods orders for last month and the Conference Board’s reading of consumer confidence for this month.
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