S&P 500, Dow at all-time high as banks, industrial rise

(Reuters) – The S&P 500 and the Dow hit record highs on Friday as economy-linked stocks including banks and industrials gained on optimism around strong U.S. economic growth.

FILE PHOTO: American flags hang from the facade of the New York Stock Exchange (NYSE) building after the start of Thursday’s trading session in Manhattan in New York City, New York, U.S., January 28, 2021. REUTERS/Mike Segar/File Photo

Financial stocks rose 0.6%, more than any other S&P sector, with Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co rising between 0.5% and 0.9%.

The banks will kick off the first-quarter earnings season next week, and analysts expect profits for S&P 500 firms to have jumped about 25% year on year, the strongest performance for the quarter since 2018, according to Refinitiv IBES data.

“We have had a tremendous run recently and there’s some excitement about how strong corporate America’s earnings will be,” said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.

“It is a chance to justify the rallies that we have seen recently to new highs.”

Data on Friday showed U.S. producer prices increased more than expected in March, resulting in the largest annual gain in nine-and-a-half years, likely marking the start of higher inflation.

However, the Federal Reserve’s officials have maintained that rising prices would be transitory because of the labor market’s slack and the U.S. central bank plans to keep interest rates lower for a substantial period.

“Historically, the reaction to PPI (producer prices index) number like that would have had markets selling off but clearly we are being made to understand that the Fed’s inflation target is truly asymmetric,” said Art Hogan, chief market strategist at National Securities in New York.

“If the Fed is willing to ignore high inflation in the near term, investors should likely do the same.”

U.S. President Joe Biden asked Congress to sharply increase spending to combat climate change and gun violence in a budget that marks a sharp departure from his predecessor, Donald Trump.

At 11:27 a.m. ET, the Dow Jones Industrial Average rose 76.22 points, or 0.23%, to 33,579.79, the S&P 500 gained 4.60 points, or 0.11%, to 4,101.77 and the Nasdaq Composite lost 20.53 points, or 0.15%, to 13,808.78.

The communication services index, which houses high-flying names, inched lower.

Still, the Russell 1000 growth index, which comprises mainly technology-related stocks, is set to outperform its value counterpart, made up of mostly financials and energy names, for a second consecutive week following the recent pullback in longer-dated Treasury yields. [US/]

Bank of America’s weekly fund flow figures showed investors have pumped more money into equities over the past five months than in the last 12 years.

Honeywell gained about 2% as Jefferies and J.P. Morgan raised their price targets on the U.S. aero parts maker’s shares.

Advancing issues outnumbered decliners by a 1-to-1 ratio on the NYSE and declining issues outnumbered advancers by a 1.5-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and no new lows, while the Nasdaq recorded 124 new highs and 31 new lows.

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