MarketView for May 17

Summary

Stocks continued their climb into uncharted territory on Friday, racking up the fourth week of gains in a row as encouraging economic data prompted investors to pick up shares of growth companies. The Dow Jones Industrial Average and the S&P 500 indexes finished at record highs, driven by gains in energy and industrial shares. The indexes have pushed to a series of never-before-seen levels as part of the rally that has lifted equities more than 16 percent for the year so far. In a sign of how far the market has come, the S&P 500 is also about 1,000 points above the low hit in March 2009 in the wake of the credit crisis and recession.

Data showed Americans felt better about their economic and financial prospects in early May, with consumer sentiment at its highest in nearly six years, while a gauge of future economic activity rose in April to a near five-year high.

Boeing ended the day up 2.4 percent advance to $98.92, its highest since October 2007. Exxon ended the day up 1.2 percent at $91.76.

The rate of economic growth has been expected to slow in the second quarter as tighter fiscal policy starts to bite. But recent improvement, including in the labor market and retail sales, has suggested the recovery remains resilient.

For the week, the Dow was up 1.6 percent, while the S&P 500 chalked up a 2 percent gain and the Nasdaq added 1.8 percent. For the year so far, the Dow has climbed 17.2 percent, while the S&P 500 has gained 16.8 percent and the Nasdaq has advanced 15.9 percent.

JPMorgan raised its year-end target for the S&P 500 to 1,715 from 1,580, implying a gain of just about 3.5 percent for the index for the rest of the year.

General Motors closed up 3.2 percent at $33.42 after CLSA raised its rating on the automaker's stock to "buy" from "underperform.

JCPenney lost 4.2 percent, ending the day at $18.01 after the retailer reported another steep quarterly loss on weak sales and heavy clearance deals, and Chief Executive Myron Ullman cautioned he needs time to fix the company's problems.

Tableau Software was up sharply in its first day of trading as investors bet the rising interest in big data will drive the data analysis software maker's growth. Tableau ended the day up 63.7 percent to close at $50.75.

Aruba Networks closed down 25.6 percent at $13.10 after the network equipment maker released fourth-quarter results well below Street's expectations, hurt by rising competition from Cisco Systems.

Consumer Confidence at 6-Year High

Americans felt better about their economic and financial prospects in early May as consumer sentiment rose to the highest level in nearly six years, an encouraging sign after other recent data had suggested economic growth had slowed somewhat.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment rose to 83.7 from 76.4 in April, topping Street expectations for 78. It was the highest level since July 2007. Now the question is will the improvement will be confirmed at the end of the month with the final sentiment reading. The cheery attitudes at the beginning of the month were particularly seen among upper-income households.

The barometer of current economic conditions jumped to 97.5 from 89.9, the highest since October 2007, while the gauge of consumer expectations gained to 74.8 from 67.8.

Shopping plans were encouraging, with the gauge of buying attitudes for durable goods rising to 148 from 137. Consumer activity accounts for about two-thirds of the economy.

More consumers gave a favorable view of their personal finances than in any time since 2007, with the largest gains among households in the upper third of income levels. More respondents also thought the economy would continue to improve in the year ahead.

Higher earners more frequently reported having less debt and higher asset values, though consumers were still not that much more optimistic they would see higher income in the year ahead.

Upper income households are more likely to be invested and therefore reap the benefits of the stock market rally, which has taken the market to record highs this year. Since the beginning of 2013, the benchmark S&P 500 is up about 16 percent.

The rise in stocks may also be offsetting any hit to consumers following the expiration of the payroll tax holiday at the beginning of the year, which raised taxes for many Americans.

A gauge of future economic activity released on Friday also suggested the expected slowdown will be temporary, with the index rising in April to a near five-year high. A separate report from the Conference Board showed its Leading Economic Index increased 0.6 percent to 95.0 last month, the highest level since June 2008. The index had slipped 0.2 percent in March.

Most States See Lower Unemployment

Solid hiring helped lower unemployment rates in 40 U.S. states last month, the most since November. The declines show the job market is improving throughout most of the country.

The Labor Department said Friday that unemployment rates increased in only three states: Louisiana, Tennessee and North Dakota. Rates were unchanged in seven states.

California, New York and South Carolina all reported the largest unemployment rate declines in April. Each state's rate fell by 0.4 percentage points.

The report said 30 states added jobs in April, while 18 reported fewer jobs.

Nationwide, employers added 165,000 jobs in April and the unemployment rate fell to a four-year low of 7.5 percent. The economy has added an average of 208,000 jobs a month since November. That's up from only 138,000 a month in the previous six months.

Unemployment is declining in many states because the housing industry is creating jobs again. Rates have also declined because many of the unemployed have stopped looking for work. The government counts people as unemployed only if they are actively seeking jobs.

Texas has created 41,500 construction jobs in the past year. That's helped the state be the nation's leader in job growth over the past year. The state added 33,100 jobs last month and 326,100 jobs over the past 12 months.

Texas' unemployment rate stayed at 6.4 percent in April compared with March, but has fallen from 7 percent a year ago.

New York gained 25,300 jobs in April — second most among the states — and 111,600 jobs in the past year. The job gains in April helped pushed the state's unemployment rate down to 7.8 percent from 8.2 percent in March. Some of the decline was also because people stopped looking for work.

Florida added 17,000 jobs in April and 119,100 in the past year. More than half of April's job gains were in construction. The state has gained 15,500 construction positions in the past year. Jobs in trade, transportation and utilities have grown by more than 40,000 in the past year. The category includes retail jobs.

Nevada had the highest unemployment rate last month, at 9.6 percent. But it also had the biggest decline of any state over the past year, falling from 10.7 percent. Part of that decline is because many people have given up on their job hunts. But the state has also gained 22,700 jobs in the last 12 months.

North Dakota reported the nation's lowest unemployment rate, at 3.3 percent. The state has benefited from an oil and gas drilling boom.