Stocks recorded strong gains to begin the new year, with the S&P 500 closing up 1.7% to 2,277. The Dow Jones Industrial Average nearly hit the 20,000 milestone on Friday, registering a high print of 19,999.63. High-yield bonds and longer maturity Treasury prices moved higher as yields declined. The Ten-Year US Treasury Yield is now at 2.42%. Crude Oil increased to $54/barrel and the US Dollar Index slightly declined to 102.21.
US data was generally strong. The PMI Manufacturing Index had a solid December, as the composite index finished at 54.3. This data shows that the US manufacturing sector had a strong end to the year and production expanded at a robust pace. Employment data on Friday was overall very positive. While nonfarm payrolls rose a lower-than-expected 156,000 in December, average hourly earnings jumped 0.4% for a second gain in three months. This is a positive as the year-on-year rate is now at a cycle high of 2.9%.
In M&A last week, Stanley Black & Decker (SWK) agreed to acquire the Craftsman brand from Sears (SHLD) for cash payments totaling about $900 million over three-plus years. The market reacted positively to the deal, believing SWK got a great price for the brand. The transaction is expected to be accretive to SWK's earnings.
Earnings season gets under way next week with large banks reporting on Friday. Because of bank-friendly policies promised by the new administration, expectations are high coming into the earnings reports. In addition, JP Morgan hosts a health care conference starting Monday and some companies are anticipated to pre-announce financial expectations in their presentations. These announcements could cause volatitly in health care stock prices. US Data will include Retail Sales and Consumer Sentiment.