US stocks were on track to rise to all-time highs Friday at the end of a stellar week in which the S&P 500 had already risen about 4% and was heading for its strongest weekly gain in three months.
Signs the US and other economies are recovering from the latest round of coronavirus restrictions have also boosted oil prices to one-year highs, as the demand outlook brightens.
China’s CSI 300 rose 0.17% overnight, finishing the week in the green, as the strong economic recovery outweighed worries over rising short-term credit costs. Japan’s Nikkei 225 jumped 1.54% on upbeat earnings and stimulus hopes.
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Investors have been pulled in different directions in recent weeks. Hopes that vaccines and stimulus will power a strong recovery in 2021 have clashed with short-term economic pain and a day-trading frenzy that shook markets at the end of January.
But better-than-expected economic data from the US has sparked new optimism that the recovery will be a powerful one.
Figures released Thursday showed that new US unemployment claims fell last week for the third week in a row – to 779,000 – and factory orders rose more than expected in December.
The Bank of England on Thursday cut its short-term growth forecasts because of January’s lockdown. But it said the country’s speedy coronavirus vaccine rollout “should help the UK economy recover rapidly later this year.”
Adding to the general mood of optimism, Democrats in Congress are powering ahead with plans to pass a $1.9 trillion stimulus package without Republican approval.
Investors’ attention Friday will be on the official monthly US employment report, due at 8:30 a.m. ET. Economists at Daiwa expect a modest 50,000 increase in payrolls, following a 140,000 decline in December. Yet they said in a note that recent data suggested the figure could be better than expected.
Oil prices have soared this week as the economic outlook has brightened, with investors betting demand will rise. Brent crude was up 1.12% on Friday morning to $59.66 a barrel, its highest level since last February. Brent has gained more than 7% this week, its largest weekly increase in a month. West Texas Intermediate crude was 1.42% higher at $57.03 a barrel.
“With inflation sentiment rising in the US, partially due to higher government borrowing, adding a tailwind to the economic recovery, the conditions still remain supportive for oil markets,” said Jeffrey Halley, a senior market analyst at the currency firm Oanda.
The dollar index slipped back from its highest level since December. It was last down 0.16% to 91.39.
A strong pound, after the Bank of England suggested negative interest rates were not likely anytime soon, added to greenback weakness. The pound was up 0.21% to $1.37 on Friday after jumping Thursday.
US bond yields were little changed. The yield on the 10-year Treasury note was roughly flat at 1.139% but continued to trade near its highest level since March, reflecting stronger growth and inflation expectations. Yields move inversely to bond prices.