U.S. stocks rose for a second straight week, with benchmark indexes reaching all-time highs, as data from durable goods to housing and employment fueled optimism that the world’s largest economy is strengthening.
Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. advanced at least 5.1 percent, pacing gains among commodity producers. Homebuilders rallied 5.5 percent as a group after sales of new homes topped forecasts. Apple Inc. added 2 percent after striking a deal to sell its iPhones through China Mobile Ltd. Twitter Inc. surged 6.2 percent amid optimism that the company has room to expand sales in digital advertising.
The Standard & Poor’s 500 Index climbed 1.3 percent to 1,841.40 in the holiday-shortened week, setting a record on Dec. 26. The Dow Jones Industrial Average added 257.27 points, or 1.6 percent, to 16,478.41. The U.S. market was closed Dec. 25 for the Christmas holiday.
“The data by and large has been better,” Derek Hamilton, a global economist at Waddell & Reed Financial Inc. in Overland Park, Kansas, said in a phone interview. His firm manages $114 billion. “It supports the Fed’s view that the economy in general is getting better and is strong enough to withstand tapering.”
The S&P 500 has climbed 3.7 percent since Dec. 13, capping its biggest two-week rally since July, as the Federal Reserve announced plans to reduce the pace of bond buying amid faster-than-estimated economic growth. Reports over the past week showed orders for long-lasting goods climbed in November by the most in 10 months and jobless claims declined more than anticipated in the latest week.
The benchmark index has gained 2 percent in December, heading for its fourth straight monthly advance. The S&P 500 is up 29 percent this year, on course for its biggest annual increase since 1997.
Equity returns will slow next year, Wall Street strategists forecast. The S&P 500 will end 2014 at 1,950, according to the average of 20 estimates compiled by Bloomberg. That represents a 5.9 percent gain over the next 12 months.
Tobias Levkovich, Citigroup Inc.’s chief U.S. equity strategist, while boosting his forecast for the S&P 500 to 1,975 from 1,900, said there is a “significant” chance that the market may have a decline of 5 percent to 10 percent in the first half amid potentially higher volatility.
“There is reason to be concerned about a more meaningful pullback even though identifying the specific catalyst may be difficult,” Levkovich wrote in a note. “Factors such as excessive earnings expectations, Fed tapering and/or economic disappointments have not had much impact thus far, but late-year runs can be reversed once fund managers lock in their annual gains.”
The Chicago Board Options Exchange Volatility Index dropped 9.6 percent to 12.46 for the week. The gauge of S&P 500 options known as the VIX is down 31 percent this year.
Nine of 10 main industries in the S&P 500 gained as commodity and telephone companies increased more than 2 percent for the best performance. Utility stocks fell 0.2 percent for the only loss.
Alcoa, the largest U.S. aluminum producer, jumped 7.6 percent to $10.69. Freeport-McMoRan, the biggest publicly traded copper company, advanced 5.1 percent to $37.50.
An S&P index of homebuilders rallied 5.5 percent as purchases of new U.S. homes exceeded projections in November, holding near a five-year high and showing the housing recovery was gaining momentum even as mortgage rates climbed.
PulteGroup Inc. advanced 7.8 percent to $20.07 while Lennar Corp. climbed 5.8 percent to $39.55.
Apple rose 2 percent to $560.09. The company, ending six years of negotiations, struck a deal that will give both the U.S. phone maker and China Mobile a means to fight declining share in the market of 1.2 billion wireless subscribers. China Mobile will sell the iPhone 5s and 5c models in its stores from Jan. 17, the companies said in a statement that provided no financial terms.
Twitter, the microblogging service that held its initial public offering last month, jumped 6.2 percent to $63.75. The stock has surged 145 percent since going public at $26 on Nov. 6, as investors bet Twitter can attract more ad dollars as companies seek to market their wares through wireless devices and tie-ins with television programming.
The company pared gains on the final day of the week, dropping 13 percent after Macquarie Capital downgraded the stock, saying it has gone “too far, too fast.”
Tesla Motors Inc. climbed 5.5 percent to $151.12 after saying the National Highway Traffic Safety Administration reaffirmed the safety rating for the carmaker’s Model S sedan. The agency opened a review of the car last month after fires in Tennessee and Washington state occurred when drivers struck metal debris.