Dow, S&P 500 end at record highs, extend win streak to 3 weeks in a row despite inflation concerns

How did stock benchmarks fare?

• The Dow
  DJIA,
  +0.89%
  rose 297.03 points, or 0.9%, to close at a record 33,800.60, after hitting an intraday all-time high of 33,810.87.
• The S&P 500 index
  SPX,
  +0.77%
  rose 31.63 points, or 0.8%, to end at a record 4,128.80, after setting an intraday record peak of 4,129.48 and hitting a milestone above 4,100.
• The Nasdaq Composite Index
  COMP,
  +0.51%
  rose 70.88 points, or 0.5%, ending at 13,900.19 and exiting correction territory, defined as a slump of at least 10% from its prior closing record.

On Thursday, the Dow added 57.31 points, or 0.2%, to finish at 33,503.57, the S&P 500 rose 17.22 points to reach at a record at 4,097.17, a gain of 0.4%, while the Nasdaq finished 140.47 points, or 1%, higher at 13,829.31, within 2% of its Feb. 12 record high.

What drove the market?

The Dow and S&P 500 clinched a round of records Friday even though U.S. Treasury yields rose after a U.S. economic report revealed inflation may be hotter than expected as the economy rebounds from the pandemic.

The U.S. producer-price index rose 1% in March, the U.S. Labor Department said Friday.  Economists polled by The Wall Street Journal had forecast a 0.5% rise. The rate of wholesale inflation over the past 12 months climbed to 4.2% in March. That’s the highest level since September 2011.

Investors have been keenly attuned to the possibility of a surge in inflation in the aftermath of COVID.

“As long as there is all this liquidity sloshing around, equities should continue to go higher,” said Sahak Manuelian, head of equity trading at Wedbush Securities. “The Fed’s balance sheet is only getting bigger.”

But Manuelian also said the PPI surge “spooked some people, but again, it’s still off trough levels and I don’t think it’s a whole lot to worry about yet,” he told MarketWatch.

Fed Vice Chairman Richard Clarida, in a Friday interview, said that any rise in inflation will be transitory, noting that the Fed’s forecast is that inflation will move above 2% for a time this year and “for inflation to return later this year to around 2%.”

“We would expect those to be transitory and as the year progresses and we go into next year, if they’re not, then we’ll have to take that into account certainly,” Clarida said on Bloomberg TV.

Stock-market investors this week have been mostly taking cues from the Fed and trading near record levels, as the central bank underscores its intention to not remove its easy money policies until the jobs market achieves a full recovery from the COVID pandemic.

Fed Chairman Jerome Powell on Thursday advocated stepping up the rate of vaccinations globally and said that the lack of vaccinations abroad poses a threat for the U.S.’s economic progress.

“Viruses are no respecters of borders, and until the world really is vaccinated we’re all going to be at risk of new mutations,” Powell said at a seminar on the global economy hosted by the International Monetary Fund. “I would look at global vaccination as a risk really…to the progress that we are making.”

A projection of future interest rates by Fed officials implies that the central bank will hold key interest rates near 0% through at least 2023.

Stock buying has reverted to technology stocks this week after a rotation into beaten-down in value stocks viewed as likely to outperform as the economy rebounds from COVID.

Some analysts said the market’s moves on Friday could be subject to profit-taking after a healthy weekly run-up. For the week, the S&P 500 advanced 2.7%, the Dow rose 2%, and the Nasdaq added 3.1%. The S&P 500 and the Dow booked their third straight weekly gain, while the Nasdaq climbed for two weeks in a row.

“The market may be ready to take a breather as investors digest all the good news, determine how much of that is priced in and weigh it against uncertain risks like inflation,” wrote Lindsey Bell, Ally Invest’s chief investment strategist, in a Friday note. 

“To be sure, the backdrop in 2021 suggests there should be more room to run, but right now the market is expensive.”

Which companies were in focus?

• Shares of Pfizer Inc.
  PFE,
  +1.78%
   gained 1.8% Friday after the drugmaker said it requested that the emergency authorization for its COVID-19 vaccine be amended to include teens between the ages of 12 and 15 years old.
• Shares of General Electric Co.
  GE,
  +1.12%
  got a 1.1% boost Friday, from a bullish call by UBS analyst Markus Mittermaier, who cited an acceleration of the transformation into a “simpler” industrial company.
• Amazon.com Inc.
  AMZN,
  +2.21%
  shares rose 2.2% after the e-commerce giant prevailed with enough votes to defeat a unionization effort by workers at one of its warehouses in Alabama.
• Johnson & Johnson
  JNJ,
  -1.06%
  shares were 1.1% lower Friday after the Centers for Disease Control and Prevention said the company was expected a significantly lower amount of COVID-19 vaccines to states. 
• Boeing Co.
  BA,
  -1.02%
  shares were 1% lower after it flagged a potential electrical issue in certain 737 MAX aircraft, asking 16 customers to address it before further operations. But at least one Wall Street analyst said a fix would be easy and cause “minimal disruption” for Boeing customers.
• Shares of Naked Brand Group Ltd. NAKD rose 2.2%, after the New Zealand-based apparel and swimwear company disclosed that Ault Global Holdings Inc.

How did other assets fare?

• The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.1% at 92.16.
• U.S. crude CL.1, for May delivery
  CLK21,
  -0.39%
  fell 28 cents per barrel, or 0.5%, to settle at $59.32 a barrel on the New York Mercantile Exchange, while losing 3% for the week.
• The 10-year Treasury note yield TMUBMUSD10Y rose 3.2 basis points to 1.664%, but ended the week lower. Bond prices move inversely to yields.
• Gold futures fell, with the June contract GCM21 sinking $13.40, or 0.8%, to settle at $1,744.80 an ounce on Comex, but tallying a weekly gain.
• In Europe, the Stoxx 600 index SXXP closed up 0.1%, recording six weeks in a row of gains, while London’s FTSE 100 UKX fell 0.4%, after Prince Philip—patron of business organizations and consort to Queen Elizabeth II—died at 99.
• In Asia, the Shanghai Composite SHCOMP finished 0.9% lower, Hong Kong’s Hang Seng HSI closed down 1.1%, while Japan’s Nikkei 225 NIK closed up 0.2%.