The major domestic equity indexes moved higher on Friday, following upbeat economic data and gains in technology shares. The result was that both the Dow Jones Industrial Average and the S&P 500 indexes chalked up a fifth straight week of gains.
Data indicated retail sales rose in September, and the University of Michigan’s consumer sentiment index hit its highest since January 2004.
Another report presented consumer prices as chalking up the largest increase in eight months as hurricanes Harvey and Irma raised demand, while underlying inflation remained muted.
Netflix closed 1.9 percent higher after hitting an intraday record high at $200.82 on a slew of price target increases ahead of its earnings report on Monday.
Apple closed 0.6 percent higher, thereby giving the S&P 500 index its largest upward push, while the S&P technology index rose 0.5 percent. Shares of the large banks were mixed following reports from Bank of America and Wells Fargo.
The CBOE volatility index remains at historically depressed levels, closing at 9.61 on Friday.
For the week, the Dow was up 0.4 percent and the S&P 500 was up 0.2 percent. The Nasdaq rose 0.2 percent for the week, registering a third week of gains.
Bank of America rose 1.5 percent after the lender’s profit topped estimates due to higher interest rates and lower costs. However, Wells Fargo fell 2.8 percent after it reported lower-than-expected revenue for the fourth straight quarter due to a decline in mortgage banking revenue.
The reports from the Wall Street banks kicked off the third-quarter earnings season, with investors hoping profit growth will help justify valuations after a rally that has sent the S&P 500 up about 14 percent this year.
Also limiting the day’s gains, the healthcare sector was down 0.3 percent as health insurers and hospital operators tumbled on news that President Trump scrapped billions of dollars in Obamacare subsidies to private insurers for low-income Americans.
Centene sank 3.3 percent, Molina Healthcare was down 3.4 percent and Anthem fell 3.1 percent. Tenet Healthcare fell 5.1 percent and Community Health System fell 4 percent.
Approximately 5.8 billion shares changed hands on the major domestic equity exchanges. A number that compares with the 6.1 billion share daily average for the past 20 trading days, according to Thomson Reuters data.
Consumer Price Index Higher
Consumer prices recorded their largest increase in eight months during September as gasoline prices increased in the wake of hurricane-related production disruptions at oil refineries in the Gulf Coast area, but underlying inflation remained muted.
The Labor Department reported on Friday morning that its Consumer Price Index increased 0.5 percent last month after advancing 0.4 percent in August. September’s rise was the largest since January and pushed up the year-on-year gain in the CPI to 2.2 percent from 1.9 percent in August. The increase in the CPI was broadly in line with economists’ expectations.
Gasoline prices rose 13.1 percent last month, accounting for 75 percent of the rise in the CPI. The increase in gasoline prices was the largest since June 2009 and followed a 6.3 percent advance in August.
The Labor Department said Harvey was reported to have impacted refinery capacity in the Gulf Coast and was likely a factor in last month’s increase in gasoline prices.
Outside gasoline, price pressures were benign. Excluding the volatile food and energy components, consumer prices gained 0.1 percent in September as the increase in rental accommodation slowed and the cost of new motor vehicles and medical care declined.
The so-called core CPI rose 0.2 percent in August. In the 12 months through September, the core CPI increased 1.7 percent. The year-on-year core CPI has now increased by the same margin for five consecutive months.
The Fed tracks the personal consumption expenditures (PCE) price index excluding food and energy. The core PCE has consistently undershot the Fed’s two percent target for more than five years. Fed Chair Janet Yellen has said that temporary factors such as one-off price cuts by wireless telephone companies are holding back inflation.
Minutes of the Fed’s Sept. 19-20 meeting published on Wednesday indicated that, “many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent.”
Last month, food prices rose 0.1 percent after a similar gain in August. Owners’ equivalent rent of primary residence rose 0.2 percent after advancing 0.3 percent in August. Prices for new motor vehicles fell 0.4 percent as manufacturers resort to deep discounting to eliminate an inventory overhang.
There were also decreases in the cost of medical care, apparel, and household furnishings. But the cost of mobile phone services rose 0.4 percent after 14 straight months of declines.
Retail Sales Up Sharply
The Commerce Department reported Friday that retail sales were up 1.6 percent in September likely as reconstruction and clean-up efforts in areas devastated by Harvey and Irma increased the demand for building materials and motor vehicles.
Retail sales were also buoyed by a surge in receipts at service stations, which reflected higher gasoline prices. Last month’s increase in retail sales was the largest since March 2015
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.4 percent last month after being unchanged in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
The rebound in core retail sales suggests the drag on the economy from the hurricanes will probably be modest. However, there seems to be some consensus that the storms could subtract at least six-tenths of a percentage point from third-quarter GDP growth.
The economy grew at a 3.1 percent annualized rate in the April-June period.