Rising retailers pushed U.S. stock indexes further into record territory Friday, as the market's fabulous start to 2018 carried through its second week.
Interest rates also climbed after a report showed that a key component of inflation accelerated last month. But stocks absorbed the gains without a hiccup, unlike earlier in the week when rate worries helped cause the Standard & Poor's 500 to edge down for its lone blemish this year.
The S&P 500 rose 18.68 points, or 0.7%, to 2,786.24 on Friday to close out its seventh week of gains in the last eight. The index is already up more than 4% for 2018.
The Dow Jones industrial average climbed 228.46 points, or 0.9%, to 25,803.19. The Nasdaq composite rose 49.28 points, or 0.7%, to 7,261.06. The Russell 2000 index of small-cap stocks rose 5.18 points, or 0.3%, to 1,591.97.
Retailers led the way after a government report confirmed that the holiday shopping season was a strong one. The numbers fit with what individual retailers have said recently, and several have raised their profit forecasts as a result.
Shares of Kohl's, Target, Nordstrom and Dollar Tree all jumped more than 3%.
Treasury yields rose after a key measure of inflation rose more last month than economists expected.
Overall inflation slowed in December, but that was mostly because of gasoline and other items that are prone to quick changes in price. "Core" inflation, which looks at the steadier components of the consumer price index, accelerated more than expected last month.
That pushed the yield on the two-year Treasury to 2% from 1.98% late Thursday. The yield on the 10-year Treasury note ended up holding steady at 2.54% after climbing as high as 2.59% in the morning.
Investors have been preparing for a gradual rise in rates, as the Federal Reserve slowly removes the aid it provided the economy following the Great Recession. The worry is that a surprise spike in inflation would force central banks to move more quickly on rates than investors expect, which could upset markets.
Stocks have been remarkably calm and strong for more than a year. Sandy Villere, a partner and portfolio manager at Villere & Co., said he's optimistic that stocks can rise even further because the economy is strengthening and Washington's tax overhaul last month will boost corporate profits, among other reasons.
But some caution is starting to creep in as prices keep climbing. Villere said he's holding more cash than in prior years as the types of stocks he prefers become more difficult to find: companies with strong growth but low prices relative to their earnings and growth.
"We're not fully invested at this point, but we haven't switched to pure defense yet either," Villere said. "Things are good enough to keep things going solidly, at least for the first half of 2018. We try not to be greedy about it."
The next tests for companies will arrive in the coming weeks, as they report their results for the last three months of 2017. Expectations are generally high, and analysts are forecasting growth of nearly 11% for S&P 500 earnings per share, according to S&P Global Market Intelligence.
Financial companies are some of the earliest to report. BlackRock jumped 3.3% to $555.53 after it reported stronger earnings than analysts expected.
On the losing end was Facebook, which fell 4.5% to $179.37 after the social media giant said it will show users fewer posts from brands and fewer videos in favor of more posts from friends and family. The changes may mean people spend less time on Facebook and less advertising revenue for the company.
The euro jumped to $1.2181 from $1.2036. The British pound rose to $1.3734 from $1.3536, and the dollar held steady at 111.09 Japanese yen.
In the commodities markets, benchmark U.S. crude rose 50 cents to settle at $64.30 a barrel. Brent crude, the international standard, rose 61 cents to $69.87 a barrel.
Natural gas rose 12 cents to $3.20 per 1,000 cubic feet. Heating oil rose a penny to $2.09 a gallon. Wholesale gasoline rose 1 cent to $1.85 a gallon.
Gold rose $12.40 to settle at $1,334.90 an ounce. Silver rose 18 cents to $17.14 an ounce. Copper fell a penny to $3.22 a pound.
In markets abroad, Japan's Nikkei 225 index lost 0.2%, South Korea's Kospi advanced 0.3% and Hong Kong's Hang Seng jumped 0.9%. France's CAC 40 gained 0.5%. The FTSE 100 in London rose 0.2%. Germany's DAX climbed 0.3%.
1:50 p.m.: This article was updated with closing prices, context and analyst comment.