By Corrie Driebusch and Riva Gold
U.S. stocks climbed Friday, notching their fourth consecutive
week of gains, as the fears of an economic slowdown that gripped
markets in December have subsided in the new year.
Data showing a healthy labor market, as well as signals from
central bankers that the Federal Reserve will be flexible with
monetary policy, have offered relief to investors who were spooked
late last year that the Fed's pace of interest-rate increases could
jolt an economy on shaky footing.
Investors received their latest reassurance on Friday when New
York Fed President John Williams said interest-rate and
balance-sheet adjustments will depend on the economy's
performance.
The Dow Jones Industrial Average rose 336.25 points, or 1.4%, to
24706.32, while the S&P 500 added 34.75 points, or 1.3%, to
2670.71 and the Nasdaq Composite added 72.76 points, or 1%, to
7157.23. All three indexes ended the week up more than 2.5% and
with gains of at least 10% since bottoming on Christmas Eve.
"Investor sentiment has really improved from the turmoil just
before Christmas," said Brian Jacobsen, multisector strategist at
Wells Fargo Asset Management. Some economic data appeared to signal
softening in the economy, he said, adding that "we almost got a
do-over" since then as investors have jumped back into the market
at improved valuations.
The New Year rally kicked off Jan. 4, when U.S. stocks bounced
back from their worst two-day start to the year since 2000. A
stronger-than-expected December jobs report showed employers added
more than 300,000 jobs last month, mitigating investor worries
about an economic slowdown. Later that same day, Fed Chairman
Jerome Powell said economic data showed good momentum heading into
2019, but the central bank was "prepared to adjust policy quickly
and flexibly," if necessary. The Dow industrials soared more than
3% that day. Since then, the blue-chip index has risen in all but
two sessions.
Adding to the recent gains have been signs of easing trade
tensions between the U.S. and China and a batch of upbeat quarterly
results from U.S. companies.
Trade friction had weighed down market sentiment in recent
months amid concerns about its impact on economic growth and
corporate supply chains. A Federal Reserve report this week showed
firms said they were struggling with higher input prices, partly
because of tariffs.
But The Wall Street Journal reported Thursday that U.S. Treasury
Secretary Steven Mnuchin proposed lifting some or all tariffs on
Chinese imports to advance trade talks. A Treasury spokesman said
in response that bargaining positions "are all at the discussion
stage."
Kevin Gardiner, global investment strategist at Rothschild
Wealth Management, said it is less clear longer term whether the
outcome of the trade negotiations will be good or bad for the U.S.
economy. But "anything which makes international trade more
difficult -- that puts sand in the wheels of businesses and
disrupts their increasingly global supply chains -- has got to be
bad for business," he said.
Corporate earnings have also been a source of support for the
market this week and continued to drive moves in individual
companies. UnitedHealth Group shares rose more than 3% Tuesday
after the parent of the nation's largest health insurer said its
sales rose in the fourth quarter. Bank of America's stock jumped
more than 7% Wednesday as its fourth-quarter earnings rose sharply,
helped by rising interest rates and lower taxes.
On Friday, SunTrust Banks was a big gainer, rising 4.6% after it
reported an increase in revenue and a drop in costs.
Overall, slightly more companies than usual have been beating
analysts' earnings estimates for the fourth quarter, according to
data from Refinitiv.
That comes against a significantly lowered bar, however,
following steep downgrades to fourth-quarter and 2019 earnings
forecasts in recent weeks.
Still, the better-than-expected earnings have helped lift shares
broadly. All 11 sectors of the S&P 500 are up in 2019.
Major indexes around the world are also off to a strong start
for the year. The Stoxx Europe 600 gained 2.2% the past week,
putting its 2019 gain at 5.7%. Major indexes in Japan and China are
also higher for the year.
The rebound has extended beyond stocks. The price of U.S.-traded
oil has risen 19% so far this year to $53.80 a barrel, a sharp
reversal from its late-2018 declines.
The price of bonds have also climbed higher in recent weeks. The
average yield premium that investors demand to hold
speculative-grade U.S. corporate bonds has dropped sharply to 4.36
percentage points, from 5.37 percentage points on Jan. 3, the day
before Mr. Powell's remarks at the Atlanta conference, according to
Bloomberg Barclays data.
After a record stretch of no speculative-grade bonds being sold,
the spigot of new debt has begun to open up, with four companies
selling a total of $3.2 billion after midstream energy company
Targa Resources Partners LP broke the dry spell on Jan. 10 with a
$1.5 billion offering.
Daniel Kruger and Sam Goldfarb contributed to this article.
Write to Corrie Driebusch at corrie.driebusch@wsj.com and Riva
Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
January 18, 2019 16:41 ET (21:41 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.