The major averages nudged further into record territory to close out the week led by Communication Services (XLC), Utilities (XLU) and Technology (XLK). Energy (XLE) was the only sector to finish in the red. Alphabet (GOOGL) became the fourth firm to reach the $1 trillion market cap joining Apple (AAPL), Amazon (AMZN) and Microsoft (MSFT) as big cap technology names continued to outpace the broader market. Economic data was mixed as December Housing Starts topped estimates but Building Permits came up short. December Industrial Production fell -0.3% while analysts were looking for a rise of +0.3%, and the University of Michigan Consumer Sentiment was 99.1 vs. 99.3 expected. A -2.36% drop in shares of Boeing (BA) on new negative software issues kept the Dow’s gains in check, but strength in Visa (V) and Home Depot (HD) helped the DJIA to pick up 50.46 points (+0.17%) and finish at 29348.10. The S&P 500 added 12.81 points (+0.39%) to 3329.62, while the NASDAQ jumped 31.81 points (+0.34%) finishing at 9388.94. The small cap Russell 2000 eased -0.33% and closed back below 1700.

Breadth was mixed with advancing issues beating declining issues by 49 units on the NYSE, while declining issues beat advancing issues by 355 units on the NASDAQ. Declining volume held a slight edge on the NYSE but advancing volume was 55% of the NASDAQ. VIX lost 0.22 point (-1.79%) and finished at 12.10. Crude oil prices rose 0.18 (+0.31%) and the February contract closed at $58.70 a barrel. Gold climbed 6.00 (+0.39%) and finished at $1556.70 an ounce.

The market continued its relentless climb into record territory and the DJIA turned in its best weekly percentage move since early September. Momentum improved leaving the door open for additional gains despite the broader market being overbought by almost any measure. The outperformance this week of the DJ Transportation Index and small cap Russell 2000, which hit new 2-week highs but remain below their highs of September 2018, also bodes well for the market going forward. However, with valuations stretched the different indexes are becoming more susceptible to a 3-5% pullback. With that being said, the rally still looks to have gas in the tank.

Earnings releases to watch for on Monday include: BancFirst Corp (BANF), Heartland Express (HTLD), Logitech International (LOGI), New Oriental Education & Technology Group (EDU) and Southern first Bancorp (SFST).

By David L. Blake, CMT