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U.S. stock indexes remained buoyant Friday, touching fresh records supported by positive economic data, but trading volume was low and some analysts noted that the rally remains dependent on a few large capitalization technology names.
The S&P 500 posted a new record close after its longest winning streak since the week ending December 27, 2019 when the market rose for five straight weeks, according to Dow Jones Market Data.
How did stock benchmarks faring?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57% rose 190.60 points, or 0.7%, to close at 27,930.33, and the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.72% added 11.65 points, or 0.3%, to close at 3,397.16, notching its second record of the week. The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.87% also closed at a fresh high of 11,311.80, up 46.85 points or 0.4%, after carving out a new intraday record high at 11,323.71. It was the tech-heavy Nasdaq’s 36th record close in 2020.
Separately, the small-capitalization Russell 2000 index /zigman2/quotes/210598147/delayed RUT -1.49% , viewed as a bet on the health of the economy, lost .8% to close at 1,552.47, while the large-capitalization focused Nasdaq-100 index /zigman2/quotes/210598364/realtime NDX -0.73% was up 0.7% to 11,555.16.
For the week, the Nasdaq Composite gained 2.7%, the S&P 500 added 0.7%, and the Dow was flat, FactSet data show. The S&P 500 posted its longest winning streak since the week ending December 27, 2019 when the market rose for five straight weeks, according to Dow Jones Market Data.
What drove the market?
“It’s a grind right now,” said Keith Lerner, chief market strategist for Truist/SunTrust Advisory Services, in an interview with MarketWatch. Lerner calls another round of congressional aid a “when, not if” and expects something to be achieved without too much market drama.
With so much economic data over the past few months having surprised to the upside, there will be a higher bar for positive market reaction to fresh data, he said. Still, his analysis shows that on average, one year after an all-time high, stocks are up 9.2%.
For now, Lerner said, “We are in a seasonably choppier time heading into elections. We might get some consolidation. Until things change you still want to stick with what’s working. Technology, homebuilders, other areas like industrials are starting to look a little better. Don’t force the value trade, wait for confirmation.”
In economic data, the U.S. IHS purchasing managers indexes for August were better than expected , with a flash reading for manufacturing at 53.6, a 19 month high, and up from 50.9 in July. The service sector index rose to 54.8 for August, a 17 month high, and up from 50 in July. A reading of 50 or above indicates improving conditions.
In other economic reports, a report on sales of existing homes in the U.S. rose 24.7% between June and July to a seasonally-adjusted annual rate of 5.86 million, the National Association of Realtors reported Friday. It was the second month consecutively in which the monthly increase was the largest on record, according to the trade group. Compared with a year ago, sales were up 8.7% in July.
“Low mortgage rates and strong demand, including from households looking for larger homes in less densely populated areas, continue to support home sales,” wrote Nancy Vanden Houten, lead economist at Oxford Economics in a Friday note.
“Still, further gains in sales will come more slowly. Mortgage purchase applications stalled in July and August, and going forward, a slow economic recovery and a still-weak labor market will limit the upside for home sales,” she wrote.
However, an ongoing stalemate in Congress on producing another coronavirus financial aid plan and light trading volumes during the seasonally slower August session have contributed to choppy trade over the week.