Stock market closes higher on bank-led gains after positive economic data

U.S. stocks closed higher Thursday as financial shares rallied following a positive reading of economic growth and the tech-heavy Nasdaq returned to finish in record territory after a month-long wait.

The Dow Jones Industrial Average DJIA, -0.31%  finished up 69.17 points, or 0.3%, at 20,728.49, with shares of Exxon Mobil Corp. XOM, -2.02% American Express Co.AXP, -0.13% and Goldman Sachs Group Inc. GS, -0.65%  leading gainers.

The S&P 500 index SPX, -0.23%  closed up 6.93 points, or 0.3%, at 2,368.06, with seven out of the index’s 11 sectors finishing higher, led by gains in the financials and industrial sectors.

The Nasdaq Composite Index COMP, -0.04%  climbed 16.80 points, or 0.3%, to close at a record 5,914.34 — its first record closing since March 1, and the 21st of the year — as it logged its fifth straight session of gains.

Earlier, the government said the U.S. economy, as measured by gross domestic product, expanded at a 2.1% annualized pace in the fourth quarter, slightly faster than the previously reported 1.9% rate. Separately, jobless claims fell by 3,000 to 258,000 in the latest week, near their lowest level in decades.

“This is a market that looks like it may be gaining some traction as we go into the end of the month. The upward revision to GDP suggests economic momentum, and that’s providing some lift,” said Alan Gayle, senior investment strategist at RidgeWorth Investments.

The data helped support the 1.2% gain in financial stocks, which are closely correlated to the pace of economic growth. Regional banks in particular enjoyed sharp moves higher, highlighted by a 2.6% gain in shares of both Zions BancorpZION, -0.90%  and Regions Financial RF, -1.02% and the SPDR S&P Regional Banking ETF KRE, -0.96%  popped 3.1%.

The S&P 500 moved into positive territory for March, up 0.2%, while the Dow remains down 0.4% for the month. The Nasdaq is up 1.5% in March.

Overall, recent gains have been slight, and of the past seven sessions for the S&P 500, not including Thursday, only one has ended with a move greater than 0.2% in either direction. This range-bound trading may be a sign that recent upward momentum on Wall Street may be stalling, even as major indexes continue to trade near records, strategists say.

Muted trading has been the norm since Friday, when the Republican-led health-care bill was pulled from the House floor after the White House was unable to overcome resistance from a conservative GOP faction, the House Freedom Caucus. The failure raised questions about the Trump administration’s ability to pass its economic agenda, which had been seen as market-friendly.

“If Congress gets bogged down with its tax and spending plans, as it is often plagued to do, that could leave the market quite vulnerable,” RidgeWorth’s Gayle said. “We need to see some tangible progress in the second quarter, otherwise confidence will erode.”

With many investors expecting a correction triggered by a policy failure, that lowers the possibility that such a correction will actually happen, seeing that “corrections tend to occur when you least expect them,” said Brian Belski, chief investment strategist at BMO Capital Markets, in a note Thursday.

“Instead, we believe stock prices are likely to bounce back-and-forth in the coming months as investors work through the potential ‘negatives’ associated with policy rhetoric and the ‘positives’ of the improving macro and earnings growth environment,” Belski said.

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