Stocks Flirt with 6-day Rally; Nasdaq Set for Best Week Since 2011

U.S. stocks edged slightly higher on Friday, aiming for the best week in years following five straight daily gains.

Investors watched for any signs of inflation in the economy, the threat of which sparked recent volatility in equities, which at one point pushed the Dow and the S&P 500 into correction territory, defined as a drop of at least 10% from a peak. Equity benchmarks have since cut those losses substantially. Trading could be light ahead of the long holiday weekend. U.S. financial markets will be closed Monday in observance of Presidents Day.

How are the benchmarks performing

The Dow Jones Industrial Average DJIA rose 46 points to 25,243, or 0.2%. The S&P 500 SPX climbed 3 points to 2,733, a rise of about 0.1%. The Nasdaq Composite Index COMP picked up 5 points, or 0.1%, to 7,259. All three are coming off a fifth session of gains on Thursday.

According to FactSet data, the Dow is up 4.2% thus far this week, on track for its biggest one-week percentage rise since November 2016. The S&P 500 is up 4.2%, in what would be its best week since January 2013. The Nasdaq is set for its best week in more than six years—with a gain of 5.3%, it is on track for its best week since December 2011.

What is driving markets?

Signs that the economy is growing, but not in any danger of overheating, helped stocks to move ahead this week and take the sting out of last week’s losses. Alongside that recovery, bullish sentiment jumped, according to a weekly survey, nearing “unusually high” levels.

However, a reading on import prices for January showed a monthly increase of 1%, helping to confirm signs that once-sluggish inflation is pushing higher. Data earlier in the week showed a rise in consumer price inflation, which is watched as a barometer for the Federal Reserve’s interest-rate plans. The import-price increase was hotter than the 0.7% rise in import prices expected by a FactSet poll of analysts, and compares with a 0.1% gain in December.

What are strategists saying?

“Markets will remain volatile, for sure, but we’ve just found out that big investors can’t stay out of this market for long, and demand for equities typically picks up in the weeks before tax year-end. Data on housing starts for January are also due at 8:30 a.m. Eastern,” said Lee Wild, Head of Equity Strategy at interactive investor, in a note to clients.

“It seems that with the previous risk-off bias having gone away equity traders are again testing the waters looking for bargains so today’s session should be a positive one for market on either side of the Atlantic. Nevertheless, we have to again stress that the case for another sell-off hasn’t gone away so investors are advised to remain guarded,” said Konstantinos Anthis, on the ADS Securities research team, in a note to clients.

What other data are in focus

Construction on new homes in the U.S., known as housing starts, jumped almost 10% in January to an annual rate of 1.33 million. That’s the second highest level since the 2007-09 recession and it easily exceeded the 1.24 million forecast of economists polled by MarketWatch.

Looking ahead, University of Michigan’s consumer-sentiment index for February is expected at 10 a.m. Eastern.

What stocks are active?

Coca-Cola Co. shares KO rose 0.7% after the beverage company reported fourth-quarter adjusted per-share earnings and sales that beat expectations. The stock was one of the biggest boosts to the Dow.

Campbell Soup Co. shares CPB fell 2.4%. The food maker’s fiscal second-quarter adjusted earnings and sales outstripped expectations, but Chief Executive Denise Morrison said the quarter was disappointing, with continued challenges for U.S. soup and Campbell Fresh.

Deere & Co. DE slid 0.6% as the heavy-equipment supplier logged a 27% rise in first-quarter net sales, but swung to a loss on a hefty charge.

Kraft Heinz Co. shares KHC sank 5.3% as the food-industry heavyweight’s fourth-quarter adjusted per-share earnings and sales came in below Wall Street’s targets.

What other assets are in focus?

European stocks SXXP were setting up for its best week since 2016. Many Asian markets were shut in observance of the Lunar New Year holiday, but the Nikkei 225 Index NIK closed up 1.2%.

The yield on the 10-year Treasury note TMUBMUSD10Y was at 2.885%. The yield hit 2.940%, the highest yield level since around January 2014, according to the WSJ Market Data Group.

The dollar pared earlier losses, with the ICE U.S. Dollar Index DXY turning slightly higher, though still set to lose nearly 2% for the week. Oil futures CLH8 rose and gold GCG8 moved higher.

Article originally published by Barbara Kollmeyer and Ryan Vlastelica at marketwatch.com