US stocks lift again to new records
US stocks enjoyed another sunny week highlighted by congressional testimony by Federal Reserve chief nominee Janet Yellen that raised confidence that aggressive monetary stimulus would not end too soon.
Washington: US stocks enjoyed another sunny week highlighted by congressional testimony by Federal Reserve chief nominee Janet Yellen that raised confidence that aggressive monetary stimulus would not end too soon.
Yellen, currently the Fed vice chair, strongly defended the Fed`s bond-buying program during the Senate panel confirmation hearing, helping propel the stock market to fresh records on three successive days, including Friday. During that time, markets shrugged off middling economic data and some disappointing earnings reports.
For the week, the Dow Jones Industrial Average vaulted 199.92 points (1.27 percent) higher to 15,961.70.
The broad-based S&P 500 tacked on 27.57 (1.56 percent) to reach 1,798.18, while the tech-rich Nasdaq Composite Index advanced 66.74 (1.70 percent) to 3,985.97.
Both the Dow and S&P 500 stood at record highs at week`s close.
With much of corporate earnings season finished and a comparative dearth of major economic data, investors fixated on Yellen`s confirmation hearing to succeed Fed Chairman Ben Bernanke when he steps down on January 31.
Known as a "dove" on inflation, Yellen rejected criticism that the bond-buying program had led to a stock market bubble and pledged to "do what we can to promote a very strong recovery."
Analysts said Yellen`s testimony was a hit.
Mace Blicksilver, director of Marblehead Asset Management, said Yellen`s comments, besides boosting stocks, did not produce a major change in Treasury bond yields or on the price of the gold, suggesting markets believe she would keep the bond purchases, known as quantitative easing, for a while, but not so long that it raises fears of inflation.
Yellen "did a pretty credible job," Blicksilver said.
Lewis Alexander, an economist at Nomura, agreed.
"Janet Yellen`s confirmation hearing was successful and it suggests that she`s going to be confirmed relatively easily and it eliminates one source of uncertainty that people have been concerned about," Alexander said.
In bidding up stocks, investors overlooked lackluster data such as an October decline in industrial production. They also shrugged off some mediocre-to-poor corporate earnings reports.
The biggest disappointment came from Cisco Systems, which lost nearly 11 percent Thursday after offering decent earnings but a dreary outlook.
The network-equipment maker warned of double-digit order declines in Mexico, India, China, Brazil and Russia. Customers in these markets have pulled back due not only to economic uncertainty, but also in some cases due to concerns about US intelligence programs, Cisco executives said.
While concerns about the National Security Agency`s programs were only a "nominal" factor for many countries, the impact was more significant in China, Cisco executives said.
"It`s not having a material impact, but it`s certainly causing people to stop and then rethink decisions. And that is reflected in our results," said Cisco`s president of development and sales Rob Lloyd.
Cisco has in the past been seen as a bellwether for the technology sector. But many technology stocks rose in spite of the Cisco woes, suggesting investors viewed its problems as company-specific, analysts said.
Another big corporate story involved an antitrust settlement between American Airlines and US Airways with the Department of Justice, in which the airlines agreed to drop key airport slots, clearing the last major impediment to their merger plan to create the world`s largest airline.
Expectations for the critical holiday shopping period were lukewarm after a mixed series of earnings reports from leading retailers.
Macy`s soared after earnings bested expectations and the company`s chief executive expressed confidence about the important fourth quarter.
The Macy`s report initially lifted many other retail stocks, even as analysts warned the results were likely company-specific and not a sign of a broader trend. Subsequent earnings reports from Nordstrom and Kohl`s led to declines in both stocks.
Market-leader Wal-Mart fared somewhat better, rising after earnings bested expectations even as it warned that retail competition "remains aggressive for every holiday purchase."
Next week, investors will get a look at home-improvement retailers Home Depot and Lowe`s, both of which report earnings. Major economic reports include retail sales, existing-home sales and the minutes from the Fed`s October 29-30 monetary policy meeting.