After flirting through the week with breaking a record, the nation’s broad stock index on Friday reached its highest level since 2008. The benchmark suggested that upbeat signals on the economy, along with low interest rates, are encouraging investors to take more risks with their money.
Friday’s optimism extended a rally of several months that pushed the Standard & Poor’s 500 past its most recent high, set in April 2011. It then held on to its gains through to the close of 1,365.74, the highest since June 5, 2008, when it closed at 1,404.05.
Although stocks as a whole have clawed out of a deep hole over the past four years, some sectors, such as technology and consumer companies, have done a lot better than others, such as banks and utilities.
Still, analysts were cautious. Friday’s economic data showed upbeat economic reports. Home sales exceeded forecasts in the latest numbers for January, and while consumer sentiment increased at its slowest pace in six months, optimism about the long-term outlook was improving, according to the Reuters/University of Michigan Consumer Sentiment Index for February. But the economic impact of rising oil prices is still uncertain, and there are lingering concerns over a European recession and the staying power of the American economy.
“We have come a long way,” said Nigel Gault, the chief United States economist for IHS Global Insight. “But the overall economy is clearly not back to normal yet.
“It means that we have had almost four years where if you held on in the stock market through the period you would be back where you started.”
For the day, the S&P was up fairly modestly, with a gain of 2.28 points, or slightly under 0.2 percent.
It was also a solid week for the Dow Jones industrial average, which rose above 13,000 on Tuesday for the first time since 2008 before falling back later in the day. The Dow closed Friday at 12,982.95, down 1.74 points, after touching 13,000 for a time.
The breach was “not one worthy of uncorking champagne bottles and having a celebration,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.
The Nasdaq closed up 6.77 points on Friday at 2,963.75. All three indexes were up less than 1 percent for the week.
The gains so far this year have pushed the S&P nearly 25 percent higher than its most recent lowest point, on Oct. 3, 2011. The broader market index has more than doubled since the March 9, 2009, low of 676.53.
In those periods, the gains and losses have shifted. Between June 2008 and Friday, consumer discretionary and technology stocks have been the top two gainers, surging more than 37 percent and 22 percent, while financial stocks have shed the most, falling more than 36 percent.
Analysts noted that over the years, surges in the stock market often do not run on parallel tracks with the economy.
In the summer of 2008, the economy was already in recession, but some days the equities markets posted strong gains. In early August, for example, the Dow surged more than 200 points in one trading session, even as corporate profits were falling, layoffs were rising and economists were warning that the outlook for the year looked grim. By October 2008, the nation’s unemployment rate jumped to the highest level in 14 years.
In 2010 and 2011, there were also gains in the early parts of those years before the markets tapered off. This was especially true last year, when the earthquake in Japan severed supply chains, and oil prices surged. Stocks sank as the second half of the year saw sharpening concerns on sovereign debt problems and the U.S. budget deficit.
The rally so far this year has coincided with a positive, though sluggish, trend in the economic data. The government’s monthly report on the jobs market showed a gain of 243,000 jobs in January, and the lowest unemployment rate since early 2009. Corporate reports have been generally positive and valuations attractive.