Broader markets rallied on Friday due to optimism built around the implementation of the GOP Tax Bill. Such broad based gains ensured gains for three major benchmarks, negating the effects of dismal economic data. Benchmarks closed in the positive territory and posted outstanding weekly gains.
The Dow Jones Industrial Average (DJI) increased 0.9% to close at 25,295.87. The S&P 500 rose 0.7% to close at 2,743.15. The tech-laden Nasdaq Composite Index closed at 7,136.56, gaining 0.8%. The fear-gauge CBOE Volatility Index (VIX) increased 1.3% to close at 9.22. A total of around 6.3 billion shares were traded on Friday, same as the last 20-session average of 6.3 billion shares. Advancers outnumbered decliners on the NYSE by a 1.52 -to-1 ratio. On Nasdaq, a 1.47-to-1 ratio favored advancing issues.
How Did the Benchmarks Perform?
The Dow added an impressive 220.7 points on Friday to finish the session above the 25,000 milestone for the second straight day. This marked its third straight record close in last four trading sessions — its best opening week since 2006. Gains for the blue-chip index were rather broad-based. Markets have rallied in the first trading week of 2018 because of the implementation of tax reforms.
Republicans successfully passed the tax bill on Dec 28 last year which slashed the corporate tax rate from 35% to 21%. It also repealed the 20% corporate alternative minimum tax, while any income brought back from overseas will be taxed 8% to 15.5%, instead of the current 35%. Immediate offset of spending on short lived capital equipment is expected to further save U.S. companies around $32.5 billion in 2018, as per Congress’s joint committee on taxation.
Meanwhile, the Nasdaq gathered 3.4% on Friday to end in the green. Gains for the tech-laden index were also broad based; however, a surge in the shares of Amazon.com, Inc. (AMZN – Free Report) and Alphabet Inc. (GOOGL – Free Report) by 1.6% and 1.3%, respectively also boosted gains for the Nasdaq. The index also posted its fourth record close for 2018.
Finally, the S&P 500 rallied 19.2 points on Friday to post its fourth record close this year. The index posted record closes on all the four trading days for the first time since 1964. Of the 11 major sectors of the S&P 500, nine ended in the positive territory, with technology shares leading the advancers. The Technology Select Sector SPDR ETF (XLK) gained 1.1%. Shares of Microsoft (MSFT – Free Report) and Apple (AAPL – Free Report) gained 1.2% and 1.1%, respectively and pushed the S&P 500 higher. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
On the economic data front, the nonfarm payrolls for the month of December came in at 148,000, lower than the consensus estimate of 190,000 job additions. Moreover, the unemployment rate for December remained stagnant at 4.1%, in line with the consensus estimate of 4.1%. The jobless rate has remained at the same level for two consecutive months.
The average hourly earnings for December surged 0.3%, also in line with the consensus estimate. The average workweek for the last month came in at 34.5 hours, remaining constant with the figure for the last month.
The U.S. trade deficit increased 3.2% in November to settle at $50.5 billion. This is its highest deficit since January 2012. The ISM Services Index for December declined 1.5 points to 55.7%. The consensus estimate for the period was 57.7%.
Finally, factory orders in the United States surged 1.3% for the month of November, in line with the consensus estimate.
For the week, the Dow, the S&P 500 and the Nasdaq gained 2.3%, 2.6% and 3.4%, respectively. This marked the Dow’s best weekly run since Dec 1, 2017. The S&P 500 and the Nasdaq posted their best weekly increase since Nov 11, 2016 and Dec 9, 2016, respectively.
The tech-heavy Nasdaq closed above the 7,000 level for the first time. Optimism over strong market performance in 2018 contributed to these gains. All the three key U.S. indexes posted magnificent gains in 2017 and maintained the momentum on the very first trading day of this year.
The S&P 500 also moved past 2,700 for the first time. Optimism over strong market performance in 2018 contributed to these gains. Favorable economic data, including an upbeat manufacturing report and record construction spending boosted markets.
Finally, the Dow touched the psychological level of 25,000 for the first time. The blue-chip index registered its fastest 1,000-point rise since its inception in May 1896. Also, the 30-stock index posted 1,000-point increase five times in 2017 on the back of Trump’s pro-growth economic policies, upbeat economic data and strong corporate earnings.
Stocks That Made Headlines
NVIDIA Promises Progress in Autonomous Vehicles at CES 2018
The technology sector is in focus this week with the Customer Electronics Show (CES) 2018 set to begin tomorrow and run through this Friday. (Read More)
Hess Discovers Oil in Stabroek Block, Offshore Guyana
Hess Corporation (HES – Free Report) announced that the sixth oil discovery — Ranger-1 exploration well — since 2015 in the Stabroek Block, offshore Guyana, was a success. (Read More)
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