A late surge in the final hour of trading on Friday lifted the Dow Jones Industrial Average higher by less than 0.1% for the day, but good enough to make it 11 straight sessions in which the index closed at a record high, the longest such streak since Ronald Reagan was president.
For the week, the Dow was up an even 1%, its third straight weekly increase of least that much, while the S&P 500 rose 0.7% and NASDAQ inched up 0.1%. Year to date, NASDAQ is the market leader with an 8.6% price increase while the S&P is up 5.7% followed by the Dow with a 5.4% rise. Foreign markets were mixed. European stocks were mostly negative, with the Stoxx Europe 600 down 0.1% for the week, although Germany’s DAX index gained 0.4%. The main Asian indexes were mostly higher, led by a 1.6% gain in Shanghai.
U.S. government bond prices were mostly higher, indicating some skepticism about a possible Federal Reserve interest rate increase at its monetary policy meeting in mid-March. Last week the Fed released the minutes of its February 1 meeting, in which “many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations.” While some investors interpreted the words “fairly soon” to mean March, the bond market wasn’t buying it, as bond prices rose and yields dropped sharply after the announcement. The yield on the benchmark Treasury note closed the week at 2.31%, its lowest closing level since the end of November.Since a recent peak of 2.59% in mid-December, the yield on the note has dropped nearly 30 basis points.
Yields on high-grade foreign sovereign bonds were also sharply lower last week on a flight to quality. The yield on Germany’s 10-year bund dropped 12 bps to 0.19%, its lowest level since the end of last year, while the yield on the U.K.’s 10-year bond fell 14 bps to 1.16%, its lowest level this year. Investors have moved into the safest securities for fear that National Front candidate Marine Le Pen, who favors pulling France out of the euro zone, might win the country’s presidential election this spring. Yields on French government bonds had been surging in recent weeks although they settled back down toward the end of the week.
Reports on the U.S. economy picked up last week. Despite higher mortgage rates, home sales remained buoyant. Existing home sales, the biggest category, rose 3.3% to an annual rate of 5.69 million, the highest level since February 2007, before the financial crisis. New home sales were also higher, rising 3.7% to an annual rate of 555,000, although that was well below the consensus forecast of 576,000. The Chicago Fed’s national activity index slid back into negative territory, registering negative 0.05, indicating below historical growth. The University of Michigan’s consumer sentiment index ended February at 96.3 , up from its preliminary reading of 95.7 earlier in the month but down from January’s final reading of 98.5.
Reports/dates/facts/links worth paying attention to over the next week:
1. February 27: Durable goods orders for January; pending home sales index for January.
2. February 28: Fourth quarter GDP, first revision; Conference Board consumer confidence index for February; S&P Corelogic Case-Shiller home price indexes for December.
3. March 1: Personal income and outlays for January; auto sales for February; ISM manufacturing index for February; construction spending for January; Federal Reserve Beige Book.
4. March 2: Weekly unemployment claims.
5. March 3: ISM non-manufacturing index for February.