Things are coming up roses in the stock market, lately.
The Dow Jones Industrial Average, S&P 500 index and Nasdaq Composite Index are off to their best starts to a year since 2006 after a powerful series of gains.
The Dow DJIA, +0.51% closed up 0.5% on Thursday, pushing its year-to-date gain to 2.89%, which would mark the best first seven days to a year since 2006, when stocks burst 3.04% higher over the same period. The S&P 500 index SPX, +0.45% rose 0.5% on the day and has returned 3.58% thus far this year, its best start since a 3.68% gain 13 years ago, while the Nasdaq Composite COMP, +0.42% booked a 0.4% gain, enough for a 5.3% year-to-date advance, representing its best seven-session to kick off a year since its 5.72% rise also in 2006.
Read: Dow and S&P 500 escape correction territory after 5-day stock-market surge
A late-session rally helped to solidify Thursday’s gains, coming after investors digested comments from Federal Reserve Chairman Jerome Powell, who pronounced at the Economic Club in Washington on Thursday afternoon that the economy is in good health, while adding that the central bank would be cognizant of stresses to financial markets amid rate hikes. The comments were a reiteration of Powell’s remarks last week during a broad panel discussion of current and former Fed bosses that helped to placate anxious investors and reverse what was shaping up to be another dismal year.
Equity markets are emerging from a bruising 2018, which resulted in the worst declines for the three main U.S. benchmarks in about a decade. The year that was capped by the ugliest losses in the trading session immediately before Christmas on record, in a month typically associated with a seasonal uptrend in the market.
It isn’t clear if this year’s solid start bodes well or ill.
For one, January’s early convulsions had put the S&P 500 on pace for its worst start to a year in about two decades, perhaps driving home the point that the current market dynamic leaves investors vulnerable to whipsaw action.
On top of that, the solid gains achieved in 2006 were soon followed by a financial crisis for the ages that took hold in earnest in 2008.
But even a few declines might not translate to an unwind of what has been a remarkable bounce-back in equities. “Look, we’re up like 10% since the day before Christmas and there’s more overhead resistance than my SAT scores so yea, a few down sessions are inevitable,” wrote Michael Antonelli, managing director of institutional sales and trading at Robert W. Baird & Co., in a Thursday financial blog.
“If I had to guess what market prognosticators are expecting I’d lean towards ‘retest in the coming months’ over ‘that was the low’ but we’ll only know in hindsight and that’s what makes stock market investing so hard,” he wrote.
Markets aren’t without concerns. Retailer Macy’s M, -17.69% put in its worst daily decline in its history dating back to 1992, highlighting weakness in the consumer, the heart of any developed economy. Additionally, Powell’s comforting comments on Thursday also came with a proviso: that the Fed’s crisis-era balance sheet would be smaller. That statement may give some pause to buyers who have fretted that a further wind down of the central bank’s roughly $4.1 billion asset portfolio may result in tighter financial conditions and more stumbles lower for stocks.
A partial government shutdown, which on Saturday will mark the longest on record, also may also eat away at investor confidence.
Read: Powell says Fed is ‘watching and waiting’ on interest rates
Providing critical information for the U.S. trading day. Subscribe to MarketWatch’s free Need to Know newsletter. Sign up here.