The S&P 500 added just 0.35 percent last week, but it was enough to establish another record high. The gains came late in the week, first after a deal in Congress to keep the government open for another two weeks, and then following the November jobs report, which showed another healthy gain. And, as has been the case since Thanksgiving, it was the cyclical sectors that led the way, including financials and industrials, although technology stocks did stabilize after falling sharply during the prior week.
Stocks surged last week as the Senate progressed toward a vote to overhaul the tax code that ultimately came in the wee hours of Saturday morning. The bill next moves into conference with the House to reconcile the differences in their respective bills. Republican leadership would like to proceed quickly to send it to the White House before Christmas.
U.S. equities resumed their winning ways last week, halting a shallow two-week skid. The S&P 500 rose 0.9 percent during the holiday shortened week and closed above 2600 for the first time. Technology stocks once again drove most the gain. The sector added 1.8 percent on the week, and for the year has more than doubled the 16 percent rise in the overall index. Industrials, materials and consumer discretionary stocks also rose more than the overall index for the week.
The widening yield spread between Treasury notes and lower quality corporate bonds accelerated last week, pushing out to their widest since the end of March. Whether this is a harbinger of declining risk appetite or rather more of a reflection of isolated weakness in a handful of sectors, including healthcare and telecommunications, remains to be seen. At least some investors decided not to wait to find out, as redemptions from high yield funds and ETFs rose.