Author: Chuck Mikolaczak
NEW YORK (Reuters) - U.S. stocks rose on Friday, capping a strong week as investors braced for a series of policy changes from the incoming Trump administration and were optimistic about the health of the economy and the path of interest rates.
The S&P 500 and Dow Jones Industrial Average posted their biggest weekly percentage gains since early November, and the Nasdaq posted its best weekly percentage gain since early December. Data this week eased concerns that inflation will pick up again, while expectations have grown that the Federal Reserve will speed up the timing and magnitude of interest rate cuts this year.
U.S. single-family home construction rose to a 10-month high, the Commerce Department reported on Friday, although rising mortgage rates and a glut of new homes could dampen demand.
Another report showed a surge in manufacturing output last month.
President-elect Donald Trump will be inaugurated on Monday, when U.S. markets are closed for the Martin Luther King Jr. Day holiday.
Uncertainty over some of Trump's policies, such as tariffs that could reignite inflationary pressures and slow the Federal Reserve's progress in cutting interest rates, has weighed on stocks in recent weeks.
But a good start to the corporate earnings season released by many big banks also helped boost the stock market this week, with the S&P 500 Bank Index rising 7.41% this week.
"Stronger growth, leading to better corporate earnings, there are a lot of questions at the start of the year about fiscal and monetary policy and what the Trump agenda is going to look like, or what shape it's going to take," said Shaw of Michigan said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Greenfield.
"Despite all of these issues, we're probably starting the year on a better footing than we have been in years past."
The Dow Jones Industrial Average rose 334.70 points, or 0.78%, to 43,487.83; the S&P 500 rose 59.32 points, or 1.00%, to 5,996.66; and the Nasdaq Composite rose 291.91 points, or 1.51%, to 19,630.20.
This week the Dow Jones rose 3.69%, the S&P rose 2.92%, and the Nasdaq rose 2.43%.
The benchmark 10-year Treasury note yield edged up 1.3 basis points to 4.619%, but has retreated from a 14-month high of 4.809% hit earlier this week.
Cleveland Fed President Beth Hammack said inflation remains a concern as recent data suggests the economy is resilient. However, Federal Reserve Governor Christopher Waller said on Thursday that the central bank may cut interest rates earlier and faster than expected because inflation is likely to continue to slow.
Data from the London Stock Exchange shows that the Federal Reserve is widely expected to keep interest rates stable at its policy meeting later this month, with the market predicting that there is more than a 50% chance of cutting interest rates by at least 25 basis points before June.
Nine of the 11 S&P 500 sectors rose, with consumer discretionary stocks rising 1.7%, while health care and real estate stocks declined.
After Barclays raised its stock target price, Nvidia's stock price rose 3.1% and Broadcom's stock price rose 3.5%, pushing the PHLX Semiconductor Index up 2.84%.
In addition, Intel's stock price surged 9.25% due to acquisition rumors, and Qorvo's stock price soared 14.43% after activist investor Starboard Value disclosed that it holds a 7.7% stake in the chip maker.
Shares of social media companies like Meta reacted mutedly after the Supreme Court rejected TikTok's challenge to a law forcing its apps to be sold or banned in the United States. Meta shares edged up 0.24%, while Snap fell 3.21%.
Advancing issues outnumbered declining ones on the NYSE by a 2.16-to-1 ratio, and on the Nasdaq, advancing issues outnumbered declining ones by a 1.73-to-1 ratio.
There were 24 S&P 500 stocks hitting new 52-week highs and no new lows; the Nasdaq Composite hit 66 new highs and 73 new lows.
Volume on U.S. exchanges was 14.57 billion shares, compared with the 15.65 billion share average for the full session over the past 20 trading days.
(Reporting by Chuck Mikolajczak; Additional reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Richard Chang)