U.S. stocks "melted up" Friday as the Standard & Poor's 500 index, the Dow Jones industrial average, Nasdaq Composite Index and Russell 2000 Index posted all-time closing highs on continued upward momentum from President Donald Trump, who promised a "phenomenal" announcement about his tax plan in the next two to three weeks.
Industrial stocks, led by defense/aerospace companies Boeing and Lockheed Martin, outperformed on the week. Crude oil also helped lead the charge amid output cuts by the Organization of the Petroleum Exporting Countries, which in turn boosted energy stocks.
The momentum looks as if it could continue. "Broad market sentiment is showing some signs of excessive optimism, which could act as a near-term contrarian warning sign," analysts at LPL Financial said in a research report. "These are only near-term concerns, though, as we still aren't seeing the type of over-the-top sentiment seen at major market peaks."
One of the bigger challenges with the Trump agenda has been predicting how his administration will prioritize policy efforts. Of particular interest are the competing priorities of health care overhaul and tax reform, especially with the run-up in equities. Former Goldman Sachs Group Inc. President Gary Cohn is leading the effort to craft the tax overhaul, according to a White House official.
Trading week ahead
The Federal Reserve moves back into the spotlight with a slew of speakers on the circuit, including Chair Janet Yellen, who will give her semiannual testimony to the House Senate Banking Committee on Wednesday at 10 a.m. EST.
Key economic data include the January Consumer Price Index (CPI), Retail Sales, Leading Indicators, Housing Starts, and other industrial and manufacturing reports. The earnings calendar is starting to wind down, with mostly cable and technology names reporting.