NEW YORK – Encouraging news about the U.S. economy extended the stock market’s rally Friday.
Small-company stocks rose the most, a sign that investors are taking on more risk.
A gauge of future economic activity rose more than analysts had expected, as did a measure of consumer confidence, adding to evidence that the economy is steadily recovering.
Stocks closed higher for a fourth straight week. Indexes are at record levels after surging this year on optimism about the economy and record corporate earnings. The market is also being supported by ongoing stimulus from the Federal Reserve, which is keeping long-term borrowing costs at historically low levels.
“This slow but relatively steady growth, that keeps inflation in check and keeps interest rates low, is actually a pretty healthy environment for the stock market,” said Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. “Right now we are very optimistic.”
The Conference Board said its index of leading economic indicators rose 0.6 percent last month after a revised decline of 0.2 percent in March. The index is intended to predict how the economy will be doing in three to six months.
The University of Michigan’s preliminary survey of consumer confidence climbed to 83.7. Economists had predicted it would climb to 76.8.
The strength of the rally in stocks has taken many by surprise, leaving investors waiting for a drop in prices to get into the market, said Jim Anderson, an investment specialist at JPMorgan. The S&P 500 index hasn’t fallen for two consecutive days in a month.
“Everyone is waiting for a pullback,” Anderson said. “Every client asks me, ‘When are we getting a pullback?’ With so many people waiting for it, and pouncing on it when it arrives, it’s over so quickly.”
Small stocks are doing well partly because they are more focused on the U.S., which is recovering, and don’t rely as much on sales from recession-plagued Europe, as larger companies do.