The Dow and S&P 500 index climbed higher Friday, as investors pored over fresh U.S. economic data a day after an infrastructure spending agreement in Washington helped lift the broad market to all-time highs.

On Friday, Nike’s share rally was proving the primary driver for the Dow’s gains, and bank stocks were in focus after the results of the Federal Reserve’s latest stress tests released Thursday showed the institutions have enough capital to withstand a severe global recession and so can resume paying dividends and buying back stock.

What are major benchmarks doing?
  • The Dow Jones Industrial Average

    rose almost 233 points, or 0.7%, to nearly 34,430. That compares with the blue-chip’s May 7 record of 34,777.76.

  • The S&P 500

    advanced about 12.5 points, or 0.3%, to almost 4,279, near an intraday record high at 4,280.55.

  • The Nasdaq Composite Index

    was down almost 7 points, or less than 0.1%, at 14,363, after flipping earlier between gains and losses.

On Thursday, the Dow ended 322.58 points higher, up 1%, at 34,196.82. The S&P 500 advanced 24.65 points, or 0.6%, to 4,266.49, topping its previous record finish from June 14, while the Nasdaq Composite rose 0.7%, logging its 17th record close of 2021.

For the week, the Dow is aiming for a weekly rise of 3.4%, which would mark its best weekly rise since the period ended March 12. The S&P 500 was on track to rise 2.7%, which would represent its best weekly gain since Feb. 5; while the Nasdaq Composite was on pace for a 2.4% weekly gain, its best such rise since April 9, FactSet data show.

The small-capitalization Russell 2000 index

was set for a weekly gain of nearly 5% which would mark its best weekly run-up since March 12.

What’s driving the market?

Stocks mostly rose on Friday afternoon in a strong week for equity benchmarks, as a key reading of inflation was interpreted by some as somewhat easing concerns about out-of-control price rises.

The U.S. core PCE price index, the Federal Reserve’s favored inflation gauge that strips out energy and food rose 3.4% in the May year, the biggest increase in since 1992. The overall PCE price index rose 3.9% for the year, the biggest increase since August 2008. 

However, the month-to- month increase for core inflation of 0.5% in May and 0.4% for the headline index were less than forecast and followed bigger monthly readings for April.

“I think 3.4% year over year given what happened” in the throes of the pandemic is “actually pretty light,” said Brad Neuman, director of market strategy at Alger, in a phone interview, referring to the 12-month jump in the core PCE index.

PCE data is considered a broader measure of inflation than the Labor Department’s consumer-price index as it reflects changes in consumer behavior and has a wider scope. The latest PCE readings support the Fed’s position that inflation is transitory and should bolster risk assets such as equities, said Anu Gaggar, senior global investment analyst for Commonwealth Financial Network, in emailed comments.

“Today’s inflation data should calm some nerves about runaway inflation,” said Ryan Detrick, Chief Market Strategist for LPL Financial, in an emailed statement Friday. “The PCE is the Fed’s favorite measure of inflation, and it very well could be near a peak in inflation, which should help the Fed keep it’s dovish policy stance.”

Meanwhile, U.S. consumer spending showed no increase May and consumer incomes declined 2% from April to May. Economists had expected income to fall 2.7%, while spending was expected to rise 0.4%.

See: Will Fed tapering concerns derail the rising stock market? ‘Investors should look past it,’ says one strategist.

U.S. stocks have fully recovered, and then some, from the swoon that followed last week’s Federal Reserve policy meeting, with the S&P 500 on track for its best week in months.

“The market does seem happier this week,” said Sandi Bragar, managing director in planning, strategy and research at wealth manager Aspiriant, in a phone interview Friday.

U.S. equities were bolstered Thursday by the agreement in Washington on a roughly $1 trillion infrastructure plan, which includes around $579 billion in new spending on roads, bridges, rail and other physical infrastructure, analysts said, though President Joe Biden and congressional Democrats have signaled they will push for additional spending on education, child care and clean energy in a separate package.

Read: Infrastructure and the markets — here’s what the $1 trillion means

As part of its infrastructure bet, Alger owns shares of Bentley Systems, a provider of software used by civil engineers, according to Neuman. He said the firm has sought some cyclical exposure for its portfolio to benefit from the economic reopening, but expresses that through growth stocks.

Value plays were outperforming growth in Friday afternoon trading, with the iShares S&P 500 Value ETF IVE up 0.6%, compared with a loss of about 0.1% for the iShares S&P 500 Growth ETF IVW.

In other stock-related news, the Fed, after Thursday’s close, announced that temporary limits on dividend payments and share buybacks on the nation’s largest banks can end after June 30. Banks stocks such as JPMorgan Chase & Co. and Bank of America were up Friday afternoon.

See: Fed’s stress test shows big banks can withstand global recession, clearing way for payouts, share buybacks to resume

U.S. consumer sentiment, meanwhile, remains at subdued levels.

The University of Michigan’s consumer-sentiment index reading for June U.S. slipped in the second half of June. The reading was 85.5 in June, down from the mid-month flash estimate of 86.4 but above the 82.9 reading registered in May. Economists had expected the gauge to tick up to 86.5 from a reading of 86.4 in May.

“Consumers felt a bit more optimistic in June compared to last month despite navigating an economy with elevated prices and a slower-than-expected jobs recovery,” wrote Oxford Economics economists Mahir Rasheed and Greg Daco, in a Friday report.

Which companies are in focus?
  • Shares of Dow component Nike Inc.

    jumped nearly 14.6%, after the company late Thursday topped Wall Street revenue estimates by more than $1 billion, a turnabout from the year-ago quarter when sales were pummeled by the COVID-19 pandemic.

  • Shares of Virgin Galactic Holdings Inc.

    soared 31.7% after the company said it received approval from the Federal Aviation Administration to fly passengers into space.

  • BlackBerry Ltd.

    shares were off over 5.8% after the company, a popular meme stock, reported a narrower-than-expected adjusted quarterly loss and sales that beat expectations late Thursday.

  • Shares of big banks, including Bank of America Corp.
    JP Morgan Chase & Co.

    and Citigroup Inc.
    were mixed after the Fed stress tests. Shares of B.ofA. were up 2.1%, while Citi shares were up 0.3% and JPMorgan’s stock was up 1.1%.

  • Shares of CarMax Inc.

    rose 5.8% after reporting results early Friday that blew past Wall Street forecasts, boosted by surging demand for used cars.

How are other assets faring
  • The yield on the 10-year Treasury note TMUBMUSD10Y was up about 5 basis points at 1.545%.

  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was little changed.

  • Oil futures were inching higher, with the U.S. crude benchmark CL00 up 19 cents, or 0.3%, at $73.49 a barrel on the New York Mercantile Exchange. Gold futures GC00 ended higher, rising nearly 0.1% to settle at $1,777.80 an ounce.

  • In European equities, the pan-Continental Stoxx 600 SXXP closed 0.1% higher, bringing weekly gains to 1.2%. The London’s FTSE 100 rose 0.4% for a weekly gain of 1.7%.

  • In Asia, the Shanghai Composite SHCOMP rose 1.2% and Japan’s Nikkei 225 NIK climbed 0.7%, while Hong Kong’s Hang Seng Index HSI rose 1.4%.

—William Watts contributed to this report.

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