Fourth-quarter GDP is weaker than expected, but strategists say it isn't likely to upend a market mostly trending higher in January
U.S. equity benchmarks on Friday surged to session highs, finishing the day squarely in record territory and booking a fourth straight weekly advance. A reading of fourth-quarter gross domestic product came in slightly softer than expected but was viewed by investors as healthy enough not to derail the perception that the economy is on firm footing.
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Meanwhile, the U.S. dollar pared some of its early losses, but remained in negative territory against its peers, after Treasury Secretary Steven Mnuchin on CNBC on Friday said a strong buck is in the best interest of the U.S., and as President Donald Trump delivered a keynote speech at the World Economic Forum in Davos, Switzerland. Trump's speech highlighted the strength of the domestic economy and offered a less protectionist stance on international trade.
What are the main benchmarks doing?
The Dow Jones Industrial Average rose 223.92 points, or 0.9%, to a record at 26,616.71. Shares of Intel Corp. and 3M Co. (MMM) contributed a significant portion, about 75 points, of the Dow's solid advance.
Meanwhile, the S&P 500 index climbed about 33.62 points, or 1.2%, to an all-time high at 2,872.87 on the back of a 2.2% gain in the health-care sector and a 1.6% rally in technology, viewed as the growth areas of the market.
The tech-laden Nasdaq Composite Index , meanwhile, surged 94.61 points, or 1.3%, to 7,505.77, closing at a record.
All three benchmarks finished at their best levels of the day, suggesting that investors continue to rush into equities amid an almost relentless ascent for assets perceived as risky despite rising concerns about lofty valuations.
Read: 'FOMO' stock market sees a week of record inflows (http://www.marketwatch.com/story/fomo-stock-market-sees-a-week-of-record-inflows-2018-01-26)
For the week, the Dow, Nasdaq and S&P 500 all recorded advances of at least 2.1%, marking a fourth consecutive weekly rise.
What are the drivers for the markets?
Consumers and businesses powered the economy to a 2.6% rate of growth in the final three months of 2017 (http://www.marketwatch.com/story/gdp-grows-26-in-fourth-quarter-but-falls-short-of-wall-streets-mark-2018-01-26), but declining inventories and a wider trade deficit kept the U.S. from hitting the 3% mark for the third quarter in a row for the first time in 13 years.
Economists surveyed by MarketWatch had forecast a 3% increase in gross domestic product, the official scorecard for the U.S. economy.
Still, the reading was viewed as sufficiently solid to maintain what has been a mostly bullish run for U.S. equities amid better-than-expected corporate results and expectations for a pro-business legislative regime under Trump.
A weaker dollar also has been a catalyst for gains in shares of multinational companies because it can boost sales and revenues from buyers using other currencies.
Check out:MarketWatch's Economic Calendar (http://www.marketwatch.com/economy-politics/calendars/economic)
What are strategists saying?
Ian Winer, head of equities at Wedbush Securities, said the fourth-quarter reading of GDP is solid enough to keep markets riding higher, combined with corporate tax cuts that are still filtering through Wall Street.
"I think clearly on the headline it's slightly disappointing but I think people who believe in the president and the tax reform and all that stuff aren't all that concerned with Q4 gross domestic product," Winer said. "I think the bull case is still in place," he said.
He also said the GDP reading may make the Federal Reserve less likely to adopt a more hawkish posture and lift interest rates at a more accelerated pace than the three hikes expected this year.
"I think a lot of it is the dollar. When you look at the dollar weakening as it has that is going to have a positive effect," on multinationals, said Brad McMillan, chief investment officer for Commonwealth Financial Network.
He also said tax legislation "is going to have an enormous positive effect on earnings as investors gradually incorporate higher earnings growth expectations because of the lower taxes."
Which stocks look like key movers?
Shares of Wynn Resorts Ltd. (WYNN)fell about 10.1% (http://www.marketwatch.com/story/wynn-resorts-shares-slide-6-on-report-of-sexual-misconduct-by-owner-steve-wynn-2018-01-26) Friday, after the Wall Street Journal said (https://www.wsj.com/articles/dozens-of-people-recount-pattern-of-sexual-misconduct-by-las-vegas-mogul-steve-wynn-1516985953) the casino firm's owner, billionaire mogul Steve Wynn, has a long history of sexual misconduct.
Honeywell International Inc.(HON) reported Friday a fourth-quarter net loss (http://www.marketwatch.com/story/honeywell-tops-profit-and-sales-expectations-boosts-earnings-outlook-2018-01-26)of $2.41 billion, or $3.18 a share, versus a profit of $1.03 billion, or $1.34 a share, in the same period a year ago. Its shares rose 2%.
Colgate-Palmolive Co.(CL) shares fell 4.9% (http://www.marketwatch.com/story/colgate-palmolive-shares-slide-after-concerns-about-challenging-2018-2018-01-26) after the company reported fourth-quarter results that were weaker than forecast.
Intel Corp.(INTC) jumped nearly 10.6% after the chip maker's earnings topped Wall Street expectations (http://www.marketwatch.com/story/intel-shares-rally-after-strong-data-center-growth-tops-street-view-2018-01-25) late Thursday. Its percentage gain was the best since Sept. 21, 2000, according to WSJ Market Data Group.
Read:Intel promises chip fix, sees no financial impact from Spectre and Meltdown (http://www.marketwatch.com/story/intel-promises-chip-fix-sees-no-financial-impact-from-spectre-and-meltdown-2018-01-25)
Shares of Starbucks Corp.(SBUX) closed down 4.2% after the coffee retailer reported same-store sales below expectations (http://www.marketwatch.com/story/starbucks-shares-fall-after-company-narrowly-misses-sales-expectations-2018-01-25) and missed sales forecasts late Thursday.
VMware Inc.'s stock (VMW) finished up 9% after the Wall Street Journal reported (http://www.marketwatch.com/story/dell-explores-moves-including-possible-ipo-deal-with-vmware-2018-01-25) that Dell Inc. could be exploring a deal to buy the cloud computing company. Dell may also be considering an IPO, the article said.
Nike Inc.(NKE) shares rose 0.5% after a report that William Ackman's Pershing Square Capital Management LP has taken a stake in the athletic-gear maker (http://www.marketwatch.com/story/bill-ackmans-pershing-square-announces-stake-in-nike-2018-01-25).
What are other assets doing?
The ICE U.S. Dollar Index (http://www.marketwatch.com/story/dollar-falls-further-as-mnuchin-defends-weak-buck-comments-2018-01-25)fell 0.3% to 89.07, resuming a move lower (http://www.marketwatch.com/story/trump-boost-fades-for-dollar-as-investors-brace-for-gdp-data-2018-01-26) but paring some its worst losses after Mnuchin's comments. Still, the buck is on track for the biggest weekly loss since May last year, according to FactSet.
Read:Investors shouldn't be surprised when Trump administration talks down the dollar (http://www.marketwatch.com/story/dont-be-so-surprised-by-mnuchins-endorsement-of-a-weak-dollar-2018-01-24)
Opinion:Making America great again by destroying the dollar is bad for the average U.S. investor (http://www.marketwatch.com/story/making-america-great-again-by-destroying-the-dollar-is-bad-for-the-average-american-investor-2018-01-25)
Gold futures ended firmly lower (http://www.marketwatch.com/story/gold-slides-in-wake-of-dollar-supportive-comments-by-trump-2018-01-26), but managed a sixth straight weekly rise, while oil futures closed 1% higher and booked a weekly gain of 4.5% (http://www.marketwatch.com/story/us-oil-prices-climb-more-than-4-for-the-week-2018-01-26). European stocks, meanwhile, rose modestly (http://www.marketwatch.com/story/luxury-goods-shares-lead-europe-higher-as-traders-shake-off-rising-euro-2018-01-26), while Asian markets closed mixed.
(END) Dow Jones Newswires
January 26, 2018 16:42 ET (21:42 GMT)