Santa rally pushes Wall St into record territory

The US stock market has pushed on from Friday’s record closes, as enthusiasm over the economic outlook helps keep the upward momentum going.

The major US stock index benchmarks advanced today, with the Dow and S&P 500 on track for another set of record closing prices.

By early afternoon in New York, the Dow Jones was up 0.54% or 87 points at 16,308, while the broader S&P 500 index rallied 0.60% to 1839.3. The biggest gainer was the NASDAQ 100, which rose more than 1% to 3567.1.

The technology-focused index was led higher by Apple, which gained 3.4% after announcing a long-anticipated tie-up with China Mobile. The deal will allow Apple to sell its iPhones to the huge Chinese market through the world’s biggest phone company.

One of the areas fuelling the stock market rally has been the strength of recent economic data and today’s National Activity Index from the Chicago Fed followed in this trend. The index leapt to 0.60 in November, from October’s level of -0.07 (originally reported as -0.18). This takes the three-month moving average to 0.25 – any level above 0 with this indicator signals growth that is above the historical trend.

Consumer sentiment remains at solid levels, with the University of Michigan’s widely-followed index of consumer sentiment unchanged at 82.5 for the final reading in December from the mid-month level. This is a robust reading compared to November’s final level of 75.1, and bodes well for consumer spending over the crucial holiday shopping season.

Inflation still shows no signs of picking up though. The PCE price index (the inflation indicator most closely-followed by the Fed) flatlined at 0% for November, and the year-on-year change is just 0.9%. This is significantly below the Fed’s 2% target and could well slow the central bank’s timeline for reducing its stimulus.

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