Major U.S. indexes notched a trifecta of records Friday to cap off another meteoric week for stocks.
Stocks mostly rose over the past week, as surging optimism around a steadily expanding U.S. economy and expectations that companies will report strong corporate profits for the fourth quarter powered indexes to new heights.
The Dow Jones Industrial Average added more than 500 points for a second consecutive week, a first for the blue-chip index in nearly 18 years, as the S&P 500 logged its second straight week of more-than 1% gains.
Some investors say the extension of last year’s rally into 2018 is a sign the bull market can continue, especially with the start of the corporate-earnings season Friday, which began with JPMorgan Chase and Wells Fargo releasing results for the most recent quarter.
S&P 500 companies are expected to expand earnings by about 10% from the year-earlier period, an improvement from the single-digit growth those businesses saw in the third quarter, according to FactSet estimates.
“People will be looking for that double-digit growth, as well as what comes through with tax reform,” said Yousef Abbasi, a global market strategist at JonesTrading. “We should be able to live up to the hype.”
The Dow industrials added 228.46 points, or 0.9%, Friday to 25803.19. The S&P 500 gained 18.68 points, or 0.7%, to 2786.24, and the Nasdaq Composite rose 49.28 points, or 0.7%, to 7261.06. All three indexes closed at records.
For the week, the Dow was up 2%; the S&P 500, up 1.6%, and the Nasdaq up 1.7%.
Bank stocks were among Friday’s biggest gainers following a flurry of earnings reports.
Shares of JPMorgan Chase, the top U.S. bank by assets and a Dow component, rose $1.83, or 1.7%, to $112.67 after reporting lower-than-expected profit because of one-time changes tied to the recently passed tax overhaul. Excluding the charge, which was widely expected among investors, per-share earnings grew nearly 3% from a year earlier.
Wells Fargo fell 46 cents, or 0.7%, to 62.55 after it reported a higher profit, as one-time impacts related to the tax law helped mask weakness in some of the bank’s main businesses.
Financial shares also have been benefiting from a rise in U.S. Treasury yields in recent sessions. Higher interest rates typically widen the spread between what banks charge on loans and what they pay on deposits, which should boost their earnings.
The yield on the benchmark 10-year U.S. Treasury rose to 2.551%, from 2.531% Thursday. Yields rise as bond prices fall.
Stocks that struggled last year, such as retailers and energy companies, continued to outperform in the first weeks of the year, a sign that investors appear to be rotating into economically sensitive stocks and out of slower-growing defensive ones, such as utilities and real estate.
“We’re starting to see investors’ sentiment overall get more constructive,” said Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management. He added that signs of a continuing global expansion and robust corporate earnings are underpinning the optimism.
Shares of consumer-discretionary stocks in the S&P 500 gained 1.3%, led by retail stocks that continue to benefit from a strong holiday sales season.
Energy stocks, which are expected to lead the S&P 500 in earnings growth, also were up, while real-estate and utilities stocks declined.
Still, while analysts say investors’ optimistic outlook is justified, it is also a cautionary sign that valuations could be overheating, opening the market to the possibility of a pullback.
“Sometimes the market feels so resilient, it’s willing to look the other way” and grind higher regardless of the news, Mr. Abbasi of JonesTrading said. “There will be a time and a place to jump off the train, but it’s not yet. This has room to run.”
Elsewhere, the Stoxx Europe 600 rose 0.3% Friday to finish its second consecutive week higher.
In Asia, Hong Kong’s Hang Seng rose 0.9% to extend its weekly gain to 1.9%, while the Shanghai Composite added 0.1% and notched its fourth straight week of gains. Japan’s Nikkei, meanwhile, edged lower Friday to finish the week down 0.3%.
—Akane Otani contributed to this article.
Appeared in the January 13, 2018, print edition.