Stocks breaking records, led by retailers
NEW YORK — Rising retailers pushed U.S. stock indexes further into record territory Friday, as the market’s fabulous start to 2018 carried through its second week.
Interest rates also climbed after a report showed that a key component of inflation accelerated last month.
But stocks absorbed the gains without a hiccup, unlike earlier in the week when rate worries helped send the Standard & Poor’s 500 lower for its lone blemish this year.
The S&P 500 rose 18.68 points, or 0.7 percent, to 2,786.24 on Friday to close out its seventh week of gains in the last eight. The index is up more than 4 percent for 2018.
The Dow Jones industrial average climbed 228.46, or 0.9 percent, to 25,803.19, the Nasdaq composite rose 49.28, or 0.7 percent, to 7,261.06 and the Russell 2000 index of small-cap stocks gained 5.18, or 0.3 percent, to 1,591.97.
Retailers led the way after a government report confirmed that the holiday shopping season was a strong one, with retail sales rising 0.4 percent last month following a 0.9 percent surge in November.
The numbers fit with what individual retailers have said recently, and several have raised their profit forecasts as a result.
Shares of Kohl’s, Target, Nordstrom and Dollar Tree all jumped more than 3 percent.
Treasury yields also rose after a key measure of inflation increased more last month than economists expected.
Overall inflation slowed in December, but that was because of gasoline and other items that are prone to quick changes in price. “Core” inflation, which looks at the steadier components of the consumer price index, accelerated more than expected last month.
That pushed the yield on the two-year Treasury to 2 percent from 1.98 percent late Thursday. The yield on the 10-year Treasury note held steady at 2.54 percent.
Investors have prepared for a gradual rise in rates, as the Federal Reserve slowly removes the aid it provided the economy following the Great Recession. The worry is that a surprise spike in inflation would force central banks to move quicker on rates than investors expect and upset markets.
Stocks have been strong for more than a year.
Sandy Villere, a partner and portfolio manager at Villere & Co., said he’s optimistic stocks can rise even further because the economy is strengthening and Washington’s move to cut tax rates last month will boost corporate profits, among other reasons.
But some caution is starting to creep in as prices keep climbing.
Villere said he’s holding more cash than prior years as the types of stocks he prefers become more difficult to find: companies with strong growth but low prices relative to their earnings and growth.
“We’re not fully invested at this point, but we haven’t switched to pure defense yet either,” Villere said. “Things are good enough to keep things going solidly, at least for the first half of 2018.”
The next tests for companies will arrive in coming weeks, as they report results for the last three months of 2017. Expectations are high, and analysts are forecasting growth of nearly 11 percent for S&P 500 earnings per share, according to S&P Global Market Intelligence.