By Joe Wallace and Paul Vigna
The Dow Jones Industrial Average and S&P 500 inched higher
and set fresh records Friday amid another volley of blue-chip
earnings and more signs of economic growth.
The blue-chip index rose 164.68 points, or 0.5%, to 34200.67,
its third straight day of gains. The S&P 500 rose 15.05 points,
or 0.4%, to 4185.47. The indexes set their 21st and 23rd,
respective, closing highs of 2021.
The Nasdaq Composite spent much of the day in the red but closed
higher as well, up 13.58 points, or 0.1%, to 14052.34. It is only
0.3% below its February record.
For the week, the Dow gained 1.2% and the S&P 500 rose 1.4%;
both have advanced four weeks in a row. The Nasdaq put in its third
straight weekly gain, up 1.1%.
The long, steady rise for U.S. equities this year is itself a
sign that the march can continue, said LPL Financial strategist
Ryan Detrick. Since 1950, when the S&P 500 was up between 5%
and 10% in the first quarter, it was up for the next three quarters
nearly 90% of the time, he said, with the average gain about 12%.
The index gained 5.8% in the first quarter.
"Think about it, we don't want things to get too hot," he said.
The current trajectory "tends to suggest the market will continue
to have an upward bias."
A strong start to earnings season from banks and other financial
companies has combined with data showing the economy is growing at
a rapid clip to propel stocks higher this week. Adding to the
momentum: A drop in yields on U.S. government bonds that has
surprised some investors in its size and speed.
Despite that, the S&P 500's financial sector rose just 0.7%
on the week. Morgan Stanley fell $2.23, or 2.8%, to $78.59 on
Friday even after the investment bank said profit more than doubled
in the first quarter, becoming the latest Wall Street firm to
report a blowout start to the year. Citizens Financial Group, Bank
of New York Mellon, PNC Financial Services Group and State Street
also posted quarterly results.
Data out Friday showing the Chinese economy grew at a record
rate of 18.3% in the first quarter will add to optimism about the
U.S.'s economic prospects, said Remi Olu-Pitan, multiasset fund
manager at U.K. investment firm Schroders.
"Maybe we should notch up our expectations a bit in the U.S. and
even in Europe," she said.
Asian indexes rose on the back of the data. China's Shanghai
Composite Index climbed 0.8%, and Japan's Nikkei 225 edged up
While the S&P 500 has gained in nine of the past 12
sessions, that masks some of the weakness under the surface, said
Frank Cappelleri, the executive director at brokerage Instinet.
Tech stocks have lost ground and some of the more speculative
trades that drove the market earlier have also faltered.
"The thing the market has been able to do is put on blinders to
underperforming areas and let the leaders dictate," he said.
One sign of flagging demand has come in the market for new
issues. Shares of Coinbase Global rose 31% in their first day of
trading on Wednesday, but that was marked against their reference
price. The stock is down from its opening trading price of $381,
closing Friday at $342. On Thursday, shares of AppLovin fell 19%
and TuSimple Holdiings fell 4% on their first day of trading. Both
fell Friday as well.
Meanwhile, comments from the Securities and Exchange Commission
concerning one of the hottest bets on Wall Street, special-purpose
acquisition companies, has resulted in a slowdown in new SPAC
issues and lower prices.
Investors being so sanguine also suggests that they may not be
accurately pricing in market risk, said Jason Brady, the president
and chief executive of Thornburg Investment Management.
Stocks ran up ahead of an economic recovery in anticipation of
it, he said. Now that it is seemingly here, stocks are still
rising. That could leave investors vulnerable to not just bad news,
but even a lack of good news, he said. Rising bond yields. any
pandemic-related setbacks, labor shortages or even disappointing
economic growth isn't priced in right now, he said.
"Obviously, it's been a great ride, but it's going to be a rocky
ride," Mr. Brady said.
The yield on 10-year Treasury notes rose to 1.571%, up from
1.531% Thursday. But it still saw its largest one-week decline
since June, falling from 1.664% at the end of last week. Yields
move in the opposite direction to bond prices. Rising yields
injected volatility into the stock market in the first quarter by
knocking shares of large technology companies.
Daniel Morris, chief market strategist at BNP Paribas Asset
Management, said falling yields call into question some aspects of
the "reflation trade," in which investors bought stocks that stood
to gain from a burst of inflation and economic activity.
Yields have fallen because the Federal Reserve has started to
convince investors that it won't bump up interest rates to ward off
higher inflation, Mr. Morris said. "The Fed's been messaging this
for a while but the market finally seems to be believing it."
Write to Joe Wallace at Joe.Wallace@wsj.com and Paul Vigna at
(END) Dow Jones Newswires
April 16, 2021 17:30 ET (21:30 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.