All three major U

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.

What are major benchmarks doing?
  • The Dow Jones Industrial Average DJIA, +0.09% rose 27.70 points, or 0.1%, to 31,458.40, closing at a record.
  • The S&P 500 SPX, +0.47% climbed 18.45 points, or 0.5%, to 3,934.83, marking its second straight all-time high finish.
  • The Nasdaq Composite COMP, +0.50% gained 69.70 points, or 0.5%, to 14,095.47, booking another record close.

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

What’s driving the market?

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, 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, advancing $1,400 payments to millions of Americans alongside other measures opposed by Republican lawmakers. Treasury Secretary Janet Yellen called 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 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.

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.

Which companies are in focus?
  • Shares of Walt Disney Co. DIS, -1.70% fell 1.8% even after the entertainment juggernaut late Thursday delivered a surprise fourth-quarter profit, which came as a surge in Disney+ subscriptions led a revenue rebound from the previous quarter.
  • S&P Global Ratings said Thursday afternoon it had downgraded Chevron Corp. CVX, +0.58% bonds to AA-, from AA, with a stable outlook. Shares of the oil giant gained 0.6%.
  • Shares of Cloudflare Inc. NET, -5.84% slid 5.8% after the cybersecurity company’s results and outlook topped Wall Street expectations on Thursday. The shares have surged nearly 400% over the last 12 months.
  • Expedia Group Inc. EXPE, -2.27% late Thursday reported results that showed the continued effects of the COVID-19 pandemic on the travel industry, with gross bookings and revenue each plunging 67% in the fourth quarter. Shares finished down 2.3%.
  • Shares of Coherent Inc. COHR, +13.75% soared 13.8%, after The Wall Street Journal reported that II-VI Inc. IIVI, -9.70%  plans to make a roughly $6.5 billion bid for the laser technology company. Shares of IIVI fell 9.7%.
  • South Korean e-commerce retailer Coupang filed for an initial public offering in the U.S.
What are other markets doing?
  • The yield on the 10-year Treasury note TMUBMUSD10Y, 1.209% jumped 3.1 basis points at 1.199%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, +0.03%, a measure of the currency against a basket of six major rivals, was up 0.1%.
  • Oil futures edged higher, with the U.S. benchmark CL.1, +2.56% rose 2.1% to $59.47 a barrel, nearing the key $60 level. Gold futures GC00, -0.11% ended 0.2% lower to settle at $1,823.30 an ounce, trimming an 0.6% weekly gain.
  • The pan-European Stoxx 600 index SXXP, +0.64% rose 0.6% and London’s FTSE 100 stock index UKX, +0.94% gained 0.9%.
  • Markets in Hong Kong and Shanghai were closed for the Lunar New Year holiday. Japan’s Nikkei 225 index NIK, -0.14% shed 0.1%.

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