The S&P 500 and Nasdaq close at record highs

s&p 500

From Sue Chang and Chris Matthews: Stocks closed higher Friday, with the S&P 500 and the Nasdaq finishing at records, as stronger-than-expected first-quarter U.S. gross domestic product growth offset the negative impact of disappointing earnings.

How did the benchmarks fare?

The Dow Jones Industrial Average DJIA, +0.31% rose 81.25 points, or 0.3%, to end at 26,543.33, while the S&P 500 index SPX, +0.47%  added 13.71 points, or 0.5%, to finish at 2,939.88. The Nasdaq Composite Index COMP, +0.34%advanced 27.72 points, 0.3%, to close at 8,146.40.

For the week, the Dow fell 0.1%, the S&P 500 climbed 1.2% and the Nasdaq rallied 1.9%, its fifth weekly gain in a row.

What drove the market?

The U.S. economy grew at an annual rate of 3.2% in the first quarter, well above the 2.3% estimated by economists polled by MarketWatch and faster than the 2.2% rate seen in the fourth quarter.

The unusual strength in Friday’s report can be attributed, in part, to a rise in inventories and exports that analysts say aren’t likely to continue in the year ahead, potentially setting the stage for weaker economic growth in the quarters to come.

Nevertheless, such evidence of continued strength in the U.S. economy is in contrast to reports abroad, where economies of the developed world are facing significant headwinds.

The most recent illustration of that is Japanese industrial production, which rose a weaker-than-expected 1% in March versus expectations for a gain of 2.4%. The data come after a spate of lackluster economic forecasts from central bankers from Australia to Sweden.

The University of Michigan said the final reading of its consumer sentiment indexin April was 97.2, down a touch from the 98.4 in reading in March.

Corporate results continue to roll in with first-quarter earnings mostly topping lowered market expectations. Still, worries about the next six months remain as investors punish companies that fail to meet estimates, driving shares down on average 3.2%, according to FTSE Russell. That compares with an 2.5% average decline the day after an earnings over the past five years.

Intel Inc. INTC, +0.06%  shares sank 9%, after the chip maker’s outlook fell way below Wall Street estimates. Fellow Dow component Exxon Mobil Corp.XOM, -2.10% also disappointed investors after it announced that its first-quarter earnings-per-share fell well short of Wall Street expectations, sending the company’s stock 2.1% lower.

The SPDR S&P 500 ETF Trust (SPY) fell $0.20 (-0.07%) in after-hours trading Friday. Year-to-date, SPY has gained 10.39%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 154 ETFs in the Large Cap Blend ETFs category.

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