By Anora Mahmudova
NEW YORK (MarketWatch) -- U.S. stock indexes closed at all-time
highs, extending their record run as consumer-spending data
reinforced perceptions that the U.S. economic recovery is poised to
accelerate in 2014.
The S&P 500 (SPX) closed 9.30 points, or 0.5%, to 1,827.99,
near its intra-day high and record close. The Dow Jones Industrial
Average (DJI) advanced 73.47 points, or 0.5%, to 16,294.61, marking
its 48th record high this year. The Nasdaq Composite (RIXF) jumped
44.16 points, or 1.1%, to 4,148.90, aided by a substantial rally in
its largest component, Apple Inc.
Both the S&P and the Dow industrials closed at record highs
on Friday.
Stocks jumped last week when the Federal Reserve decided to
begin scaling back the size of its monthly bond purchases in
January.
Investors "should remember that the Fed is reducing the pace of
asset purchases expressly due to a strengthening economy," said
Jerry Webman, chief economist at Oppenheimer Funds, in a note.
"Markets apparently get that now, whereas last May, when the Fed
first indicated it was preparing to taper, the reaction was broadly
negative at first, though growth-oriented asset classes and
subcategories rebounded fairly quickly," he said.
Meanwhile, data released Monday showed U.S. consumer spending
outpaced a modest rise in personal income. Consumer spending rose a
seasonally adjusted 0.5% last month, the fastest pace since June
and in line with expectations. However, personal income only rose
0.2%, below the 0.4% gain that Wall Street economists had
anticipated.
Separately, consumer sentiment rose this month to the highest
level since July, according to University of Michigan/Thomson
Reuters consumer-sentiment index, which hit 82.5, mostly in line
with expectations.
Speaking Monday on CNBC, Richmond Fed President Jeffrey Lacker
said his forecast for the trajectory of the Fed funds rate is the
third-highest among members of the Fed. He expects the rate to hit
2% by the end of 2015, from its current target of near zero.
"I put early 2015 for when the Fed funds rate will lift off but
that is something that can change one way or another," Lacker
said.
He also praised the central bank's decision to reduce monthly
asset purchases from $85 billion to $75 billion, adding that the
impending departure of Fed chairman Ben Bernanke had "nothing at
all" to do with the decision to taper its stimulus program.
"Given the data, given the way the committee positioned itself
over the program. this decision was kind of a slam-dunk," Lacker
said during the interview.
The comment:
* The International Monetary Fund's managing director, Christine
Lagarde, said Sunday on NBC's "Meet the Press" that the country's
economic growth is picking up and that it is poised to accelerate
as the business climate sees more certainty in 2014. Adding to that
sense of certainty is a budget deal reached by Congress and clear
communication from the Federal Reserve about its plan to wind down
its bond-buying program, Lagarde said.
In the corporate sector:
* Shares of Apple jumped 3.9% after the tech group on Sunday
confirmed it has reached a deal with China Mobile for the mobile
provider to officially carry the iPhone. China Mobile will start
selling the iPhone 5s and 5c starting on Jan. 17, with preorders
starting this Wednesday.
* Home builder stocks rallied on the prospect that hikes in
mortgage guarantee fees will be delayed in the coming year.
PulteGroup, Inc jumped 5.9%, Lennar Corp. rose 3.7%, while D.R.
Horton Inc. added 2.7%.
* Darden Restaurants Inc. shares climbed 6.4% after a second
activist investor said it would be buying up shares in the company,
just days after the restaurant chain said it would spin off its Red
Lobster restaurants. Starboard Value LP said in a filing Monday
that it has taken a 5.6% stake in the firm.
* Facebook Inc. rose 4.8%, as it began trading as part of the
S&P 500 index for the first time. Shares added more than 3%
last week and have more than doubled since the start of the
year.
* Michael Kors Holdings Ltd. shares dropped 3.7% after Wedbush
wrote that it is cautious about the stock "due to
slower-than-expected mall traffic that resulted in a
higher-than-expected markdown inventory."
* BlackBerry Ltd. erased early weakness to rise 3.7%, adding to
Friday's gains, when the stock rallied 13% in heavy volume, after
the company announced a five-year manufacturing deal with
Foxconn.
* Shares of Target Corp. fell 1% after reports that traffic was
down at Target stores following a data breach at its stores.
In other financial markets:
* Asia indexes closed mostly higher, while European stocks ended
at a three-week high. Gold futures remained under pressure
finishing below $1,200 an ounce and oil prices receded from 2-month
high. The dollar tipped slightly lower.
More on MarketWatch:
Consumer spending pick up in November
Lacker says short-term rates could hit 2% by end of 2015
Comment: Is there no top to this market?
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