The S&P 500 kicked off the first week of the new year with a 1.8% increase and fresh record highs as investors looked past turmoil at the US Capitol building and made optimistic bets on the outcomes of COVID-19 vaccine distributions and Democrats gaining control of both the Senate and the House.
The market benchmark ended the first business week of 2021 at 3,824.68, up from last week's closing level of 3,756.07 and marking a new closing high. The index also reached a new intraday high Friday at 3,826.69.
The gains came despite the US Capitol being stormed Wednesday by pro-Trump rioters who were attempting to block the certification by Congress of Joe Biden as the nation's president-elect. In the aftermath of the riot, Congress still certified Biden and Democratic congressional leaders called for President Donald Trump to be removed from office while a number of Trump administration officials resigned.
Friday's record highs also came despite weaker-than-expected monthly jobs data. US December non-farm payrolls fell by 140,000 last month when the consensus on Econoday had been for a gain of 50,000. December's fall was the first since April. Still, the unemployment rate remained unchanged at 6.7%, better than the Street's view for 6.8%.
Investors instead placed the focus of their trades on the outcome of two runoff races in Georgia that gave Democrats control of the Senate. Democrats have retained control of the House, and market participants are hopeful that having Democratic control of the presidency, House and Senate will make for a smoother path for legislation including stimulus plans that could boost the economy.
Market participants are also optimistic about the distribution of COVID-19 vaccines.
The US reported new highs in COVID-19 deaths and hospitalizations this week while a new variant of the virus continues to be identified in more parts of the country, so investors are eager for vaccines to slow down the spread of the virus, although the distribution of the vaccines has been moving more slowly than anticipated.
This week's advance was led by the energy sector, up 9.3%, followed by the materials sector, up 5.7%, and financials, up 4.9%. On the downside, three sectors fell, led by real estate, which shed 2.5%, followed by a 0.8% decline in consumer staples, and a 0.6% drop in utilities.
The energy sector's jump came as crude oil futures also rose on the week. The gainers included Apache (APA), whose shares jumped 16.8% this week as the oil and gas explorer and producer said its board authorized the company to create a holding company structure. The new structure offers advantages in risk management and provides financial and administrative flexibility, Apache's CEO said.
In the materials sector, shares of Mosaic (MOS) climbed 16.5% as JPMorgan upgraded its investment rating on the fertilizer company's stock to overweight from neutral. UBS also raised its price target on the stock this week to $28 from $27 while reiterating a buy investment rating.
In financials, Huntington Bancshares (HBAN) shares rose 14.3% on the week as the stock was added to the "Best Ideas List" at Wedbush, whose analysts said they see the lender delivering strong increases in net interest income through loan growth. The stock also received positive analyst actions this week from Piper Sandler, which upgraded its investment rating on the stock to overweight from neutral, as well as from Barclays and Jefferies, which raised their price targets on the shares.
On the downside, the real estate sector's decliners included Alexandria Real Estate Equities (ARE), which priced a public offering of 6 million shares at $164 per share, a 3.9% discount from the stock's previous close. The shares posted a weekly drop of 6.9%.
Next week's calendar appears light early in the week but will get busier as the days go by. On the economic front, the December consumer price index is due Wednesday, followed by import prices and weekly jobless claims Thursday while Friday's economic schedule includes December producer prices, retail sales, industrial production and capacity utilization, among other readings.
Fourth-quarter earnings reports from big banks including JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) are also expected Friday.