The S&P 500 notched a record closing high on Friday, with upbeat earnings reports helping to drive optimism about the US economy along with hopes for successful COVID-19 vaccines, even as investors monitored a surge in virus cases and restrictions around the country.
After a volatile trading week in which the market was whipsawed between hopes and fears about the novel coronavirus, Cisco Systems Inc provided the biggest boost to the S&P 500 after its quarterly report showed a work-from-home driven surge in demand.
Walt Disney Co also rose as its rapidly growing streaming video business and a partial recovery at its theme parks tempered its quarterly loss.
“At least for today it looks like sentiment regarding the potential for vaccines combined with very strong earnings announcements from a number of companies has investors hopeful that the economy can continue to recover,” State Street Global Advisors chief investment strategist Michael Arone said.
The Dow Jones Industrial Average rose 399.64 points, or 1.37 percent, to 29,479.81, the S&P 500 gained 48.14 points, or 1.36 percent, to 3,585.15 and the NASDAQ Composite added 119.70 points, or 1.02 percent, to 11,829.29.
Along with the S&P, the small-cap Russell 2000 also registered a record closing high on Friday, rising 2.1 percent on the day.
Friday’s outperformance of more economically sensitive cyclical sectors, including energy, real estate and industrials, over growth sectors like technology was a clear indication of “optimism around the economy,” said Tom Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.
The Russell 1000 value index, which is heavily weighted toward cyclical sectors, such as banks and energy, rose 1.97 percent on Friday, while the growth index, with a large tech company weighting, added 0.7 percent.
The three major US stock indices had fallen on Thursday, as more than a dozen US states reported a doubling of new COVID-19 cases in the past two weeks, with Chicago’s mayor issuing a month-long stay-at-home advisory.
However, a senior adviser to US president-elect Joe Biden said there were no plans for nationwide lockdowns next year and instead talked about restrictions for specific regions when the virus spread is bad there.
Arone said the aversion to a full lockdown likely cheered up some investors, but that optimism might be overdone.
He cited US Federal Reserve official warnings about the potential economic damage that rising virus cases could do without a fresh economic stimulus package in sight.
“The market is underestimating some of the impact that rising cases and no stimulus will have on the economy and earnings, and they’re overestimating the potential timeline and breadth of a vaccine distribution,” Arone said. “In the spring folks were bracing for the worst and the worst didn’t happen. Now they’re expecting the best and they may be a little too rosy.”
Positive data from Pfizer Inc’s virus vaccine study on Monday had prompted a rally that pushed the S&P 500 up 2.2 percent for the week and gave the Dow a 4 percent weekly gain. The indices also registered their biggest two-week percentage gains since April.
However, the tech-heavy NASDAQ posted a 0.6 percent decline for the week as investors booked profits in technology stocks, which have benefited from a stay-at-home environment.
Biden on Friday solidified his victory over US President Donald Trump after the state of Georgia went his way, leaving Trump little hope of reversing the outcome through legal challenges and recounts.
Advancing issues outnumbered declining ones on the New York Stock Exchange by a 4.76-to-1 ratio; on NASDAQ, a 2.83-to-1 ratio favored advancers.
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