NEW YORK - US stocks finished a bumpy week on a high note as technology and small-cap equities shook off the blues from recent weeks and led the overall market higher.
The broad-based S&P 500 closed the week on an especially dramatic note, breaching 1,900 for the first time at 1,900.53. The index gained 22.67 points (1.21 percent) for the week.
The Dow Jones Industrial Average advanced 114.96 (0.70 percent) to 16,606.27, while the tech-rich Nasdaq Composite Index rose 95.22 (2.33 percent) to 4,185.81.
Analysts were particularly heartened at the week’s gains for the Nasdaq and the small-cap Russell 2000, which rose 2.1 percent. Weakness in both of these indices has weighed on sentiment over the last month or so. “The fact of the matter is we are in a bull market,” said Tom Cahill, portfolio strategist at Ventura Wealth Management. “Nothing has really changed. Valuations are getting a little bit stretched, but by the same token, there is nothing in the data that suggests that the bull market should come to an end.” But Michael James, managing director of equity trading at Wedbush Securities, noted that trading volumes were extremely light all week ahead of the long holiday weekend. The markets will be closed Monday in observance of Memorial Day. Fewer investors are bailing out of momentum names, James said.
“It is not necessarily a representation of people being more enthusiastic,” he said. “It is more a function of sellers being less negative. As there have been fewer sellers of stocks, it has been easier for them to move higher.” James expects a “very quiet summer” with low trading volumes leading to greater volatility. - Fed, retail earnings dominate - In a week light in economic indicators, investors focused on the latest from the Federal Reserve and on a plethora of earnings from the retail sector. On Tuesday, all three indices slumped in part due to comments from Charles Plosser, president of the Federal Reserve Bank of Philadelphia, who said a strengthening US economic recovery could require the central bank to raise interest rates “sooner rather than later.”
But on Wednesday, stocks made up for all Tuesday’s losses and then some after the Federal Open Market Committee’s April policy meeting minutes suggested an earlier-than-expected increase in the federal funds rate was not in the wind. The Fed is expected to lift its near-zero rate in mid-2015. “The volatility was really around the perception of monetary policy,” said Art Hogan, chief market strategist at Wunderlich Securities. Home-improvement retailers like Dow member Home Depot and Lowe’s impressed with bullish commentary on rising demand for their goods, rising 2.4 percent and 3.7 percent, respectively.
Williams-Sonoma, which sells home appliances at its namesake stores and furniture at its Pottery Barn chain, also did well, rising 6.1 percent. Dick’s Sporting Goods finished 16.5 percent lower after slashing its full-year profit forecast from $3.03-$3.08 per share to $2.70-$2.85 due to extremely weak sales for golf and hunting equipment and apparel.  While the hunting market is expected to bounce back, golf “is a very high-ticket, highly discretionary product category, which could be a statement regarding consumer buying trends,” said a note from RBC Capital.
“Golf has been weak for roughly 15 months.”
Other retailers suffering losses after earnings reports included PetSmart, Staples, Urban Outfitters and TJX Companies.
“Generally we remain bullish on consumer spending on their homes,” said Peter Keith, a retail sector analyst at Piper Jaffray. “These investments in the home seem to be taking market share from other parts” of retail.
Retail earnings were “generally a little bit worse” than expected, he said.
Next week’s holiday-shortened economic calendar includes the second estimate of first-quarter gross domestic product, the S&P/Case-Shiller index of home prices, durable goods orders and the Conference Board’s report on consumer confidence.