By Riva Gold and Corrie Driebusch
U.S. stocks and the dollar were largely steady Friday, at the end of a week when the Federal Reserve's latest signals on interest rates rippled around the world.
The Dow Jones Industrial Average rose 9 points, or less than 0.1%, to 19863. The S&P 500 lost 0.1% and the Nasdaq Composite declined 0.3%, giving up earlier gains.
The Dow industrials had risen 8.3% from the U.S. presidential election through Thursday's close, a rally that analysts and investors say is notable for the emergence of new market leaders -- financial companies and industrial companies -- but also for a shift in enthusiasm for stocks.
"What's extraordinary is the amazing change in sentiment since the election," said Michael LaBella, portfolio manager for QS Investors. The rally of the last nearly eight years "everybody hated," he said, while in the past month there is more eagerness to own U.S. stocks.
It is even more pronounced compared with sentiment at the start of 2016, when worries about an economic recession abounded, he said.
In February, major stock indexes in the U.S. and Europe were down double-digit percentages for the year. Now, the Dow industrials are up 14% for 2016. The Stoxx Europe 600, which rose 0.2% Friday, is on track for its highest close since January, and including dividends the index is back in positive territory for the year.
"People would think you were from different planets" comparing the start of the year to now, Mr. LaBella said.
Government bonds, gold and the yen stabilized after posting steep declines Wednesday and Thursday.
The Federal Reserve raised interest rates Wednesday for the first time in a year, and signaled a quicker-than-expected pace of rate rises in 2017. The decision accelerated a postelection shift into the dollar and out of assets such as U.S. Treasurys and bond-proxies in the stock market.
Toward the end of the week, however, some investors were questioning whether the moves were overdone, noting the Fed's projections for future rate increases have often differed from eventual decisions on monetary policy. U.S. stocks rekindled their postelection rally on Thursday after initially falling on the Fed's projections.
"Stocks are hovering around highs, but it feels like we're on a bit of a tightrope at the moment," said Mitul Patel, head of interest rates at Henderson Global Investors.
For the stock market to performwell, "you need growth to be good and inflation to be OK, but you need the Fed not to sound too hawkish," he said. "If the Fed or the data disappoint, it could come under pressure."
Optimism around stocks has also started to spill over into corporations, as the Federal Reserve Bank of Philadelphia's December manufacturing survey showed firms are much more optimistic about future employment and capital spending over the first half of next year.
A stabilization in the dollar Friday also helped support sentiment toward stocks, with the WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, down less than 0.1% after gaining 2% over the previous three sessions. The dollar was down 0.4% against Japan's yen.
Many investors have been concerned about the rapid appreciation of the dollar, which could hamper a widely expected U.S. earnings recovery and make it more difficult to pay back the trillions in dollar-denominated debt around the world.
In government bond markets, the yield on the 10-year U.S. Treasury note was at 2.586%, according to Tradeweb, compared with 2.58% on Thursday, its highest yield in more than two years. Yields move inversely to prices.
In commodities, gold clawed back some ground after settling at its lowest since February, and was recently up 0.9% at $1,139.80 an ounce. U.S.-traded crude oil was up 1.9% at $51.84 a barrel.
Earlier, Japanese stocks touched a 2016 high, led by the financial sector, with the Nikkei Stock Average closing out its sixth straight week of gains.
Write to Riva Gold at firstname.lastname@example.org and Corrie Driebusch at email@example.com
(END) Dow Jones Newswires
December 16, 2016 12:14 ET (17:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.