As of Thursday’s close, the Dow was on track for third quarter gains of 4.8 percent, its eighth straight quarter of gains for the first time since 1997.
The S&P 500 was on pace for quarterly gains of nearly 3.6 percent, also its eighth straight quarter of gains. The Nasdaq composite was tracking for quarterly gains of 5.1 percent, its fifth straight positive quarter since 2015.
“The SPX has broken out of its consolidation phase, generating a bullish “pop” in the daily stochastics,” BTIG Chief Technical Strategist Katie Stockton said in a Friday morning note. “This supports near-term positive follow-through, and suggests it will take at least a couple of weeks before ‘overly bullish’ sentiment gives way to a pullback.”
“Importantly, the Russell 2000 Index has confirmed a breakout above final resistance at its July high, reflecting the expanding breadth behind the rally,” she said.
The S&P and small-cap Russell 2000 index closed at a record Thursday after the release of the GOP’s highly anticipated tax reform framework Wednesday.
“The tax framework, I think, it’s a lot of noise. Very few specifics for markets and investors to make decisions on,” said Craig Bishop, lead strategist, U.S. Fixed Income Strategies Group at RBC Wealth Management. The proposal’s release does mark an “opening salvo for discussions to begin,” Bishop said.
However, the Republican party has struggled to repeal and replace the Affordable Care Act this year despite having a majority in Congress. The tax framework released this week also contains some highly debatable proposals such as raising the tax rate for the lowest income earners while reducing the rate on wealthy individuals, contrary to what polls show Americans prefer.
In economic news, the Federal Reserve’s preferred measure of inflation posted its slowest pace of annual increase since November 2015. The personal consumption expenditures index, excluding food and energy, rose 1.3 percent in the 12 months through August, according to the Department of Commerce.
The Chicago PMI unexpectedly rose to 65.2 in September. The final read on consumer sentiment from the University of Michigan showed a slight decline from to 95.1 in September from 96.8 in August.
Treasury yields rose after the PMI report and after news former Federal Reserve Governor Kevin Warsh met with President Donald Trump and Treasury Secretary Steven Mnuchin Thursday. It’s not yet clear what they discussed, but The Wall Street Journal, citing a White House source, said the meeting was to discuss the job of heading the Federal Reserve.
“Warsh is believed to be on the more hawkish side,” said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie.
The 2-year yield traded near 1.47 percent, slightly off nine-year highs hit earlier in the week. The yield climbed amid hopes of tax relief and after encouraging reports on business spending and Fed Chair Janet Yellen’s remarks that indicated the Fed will maintain a gradual pace of monetary policy tightening.
The 10-year Treasury yield traded near 2.33 percent Friday morning after hitting Thursday its highest since July 13.
The U.S. dollar index traded near 93.21 after hitting Thursday its highest since August 18. The euro weakened after hitting $1.1832, its highest against the dollar since September 26.
U.S. crude oil futures traded mildly lower around $51.40 a barrel. Gold futures traded mildly higher around $1,290 an ounce.