The Morning Journal (Lorain, OH)
Stocks keep pushing higher in 2018
Rising retailers pushed U.S. stock indexes further into record territory, as the market’s fabulous start continued.
Rising retailers pushed U.S. stock indexes further into record territory on 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 already 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, meanwhile, rose after a key measure of inflation rose more last month than economists expected.
Overall inflation slowed in December, but that was mostly due to 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 2.00 percent from 1.98 percent late Thursday. The yield on the 10-year Treasury note held steady at 2.54 percent after climbing as high as 2.59 percent in the morning.
Investors have been preparing 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 more quickly on rates than investors expect and upset markets.
Stocks have been remarkably calm and 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. We try not to be greedy about it.”