U.S. stocks were mostly higher on Friday as the NASDAQ dipped below the unchanged mark, but shares posted one of the largest weekly gains in years, paring a significant portion of last week’s steep declines. Reports on housing construction, import prices and consumer sentiment all registered reads above analyst forecasts, while Treasury yields were mixed and the U.S. dollar managed a solid rise. Dow member Coca-Cola and Deere announced upbeat quarterly results. Gold was lower and crude oil prices traded higher. All domestic markets will be closed on Monday in observance of Presidents’ Day.

The Dow Jones Industrial Average (DJIA) added 19 points (0.1%) to 25,219, the S&P 500 Index ticked 1 point higher to 2,732, and the NASDAQ Composite declined 17 points (0.2%) to 7,239. In moderately heavy volume, 946 million shares were traded on the NYSE and 2.0 billion shares changed hands on the NASDAQ. WTI crude oil increased $0.34 to $61.68 per barrel and wholesale gasoline gained $0.02 to $1.75 per gallon. Elsewhere, the Bloomberg gold spot price decreased $5.15 to $1,348.52 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.6% higher at 89.15. Markets were sharply higher for the week, as the DJIA and the S&P 500 Index both rallied 4.3% and the NASDAQ Composite surged 5.3%.

Housing starts for January jumped 9.7% month-over-month (m/m) to an annual pace of 1,326,000 units, well above the Bloomberg forecast of a 1,234,000 unit rate. December starts were upwardly revised to an annual pace of 1,209,000. The jump in starts was supported by a 19.7% m/m gain in multi-unit activity, while single unit construction also rose solidly. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, grew 7.4% m/m in January to an annual rate of 1,396,000, after December’s downwardly revised 1,300,000 rate, which was where they were expected to remain. A m/m decline single-unit permits was met with surges for multi-unit authorizations.

The report bodes well for the housing sector that has seen supply-side issues remain a concern among homebuilders and pressure affordability. We are watching the recent run in interest rates closely as rates that move up too high or too fast could dampen demand for mortgages and threaten profits in certain areas of the financial sector.

The preliminary University of Michigan Consumer Sentiment Index unexpectedly rose to 99.9 in February, from 95.7 in January, and compared to expectations of a dip to 95.5. The index moved closer to October’s 13-year high of 100.7 as current economic conditions and the expectations portions of the report both improved. The 1-year and 5-10 year inflation forecasts remained at 2.7% and 2.5%, respectively.

Treasuries were mixed, with the yield on the 2-year note ticking 1 basis point higher to 2.19%, while the yields on the 10-year note and the 30-year bond decreased 4 basis points to 2.87% and 3.13%, respectively.

Bond yields diverged after a recent jump and the U.S. dollar continued to chip away at losses for the week.

The stock markets are extending a winning streak to six days to claw back from a recent drop to correction territory that came amid heightened volatility, fostered somewhat by concerns about rising interest rates and inflation.

Schwab Center for Financial Research – Market Analysis Group

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