NEW YORK (AP) — Gains for retailers pushed U.S. stock indexes further into record territory on Friday, and the Standard & Poor's 500 was on pace to close out its seventh week of gains in the last eight.
Interest rates also climbed after a key component of inflation accelerated last month. The yield on the two-year Treasury reached its highest level since 2008, when the financial crisis was peaking.
KEEPING SCORE: The S&P 500 was up 15 points, or 0.6 percent, at 2,783 as of 3 p.m. Eastern time. The Dow Jones industrial average gained 194, or 0.8 percent, to 25,769, and the Nasdaq composite gained 41, or 0.6 percent, to 7,252.
RETAILERS RINGING IT UP: Kohl's jumped to one of the biggest gains in the S&P 500 and was up $2.37, or 3.9 percent to $63.49. Nordstrom, Target and Dollar Tree all climbed more than 2.5 percent.
A government report confirmed that the holiday shopping season was a strong one, with retail sales rising 0.4 percent last month following a 0.9 percent surge in November. The numbers fit with what individual retailers have said recently, and several have raised their profit forecasts as a result.
The strong job market has led to higher optimism among shoppers, and they're opening their wallets up further as a result.
YIELDS: Treasury yields jumped after a key measure of inflation rose more last month than economists expected.
Overall inflation slowed in December, but that was mostly due to 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 2.01 percent from 1.98 percent late Thursday. The yield on the 10-year Treasury note held steady at 2.54 percent after climbing as high as 2.59 percent in the morning.
RATE EFFECT: Investors have been preparing for a gradual rise in rates, which dropped to record lows following the Great Recession. The worry is that a surprise spike in inflation would force central banks to move more quickly on rates and upset markets.
Stocks that pay big dividends also get hurt when bonds are paying higher interest rates, because they can lure away investors seeking income.
Real-estate stocks, which are big dividend payers, fell 0.6 percent for the worst performance among the 11 sectors that make up the S&P 500. Utilities were also weaker.
RALLY ROLLS ON: Friday's gains are the latest step forward for a market that's been locked into a strong, smooth ride upward. Sandy Villere, a partner and portfolio manager at Villere & Co., said he's optimistic stocks can rise even further because the economy is strengthening and Washington's move to cut tax rates last month will help boost corporate profits, among other reasons.
But some caution is starting to creep in as prices have climbed. Villere said he's holding more cash than prior years as the types of stocks he prefers get 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."
EARNINGS SEASON UNDERWAY: The floodgates are opening for companies to report their results for the last three months of 2017, and expectations are generally high. Analysts are forecasting S&P 500 companies will report earnings per share that are 10.7 percent higher than a year earlier, according to S&P Global Market Intelligence.
Financial companies are some of the earliest to report, and BlackRock jumped $14.99, or 2.8 percent, to $552.91 after it reported stronger earnings than analysts expected.
Besides healthy growth, investors are also waiting to hear how companies say they will use the boost in profits they'll get from the tax system's overhaul. "Are they going to put the money into the economy, or hoard it for themselves?" Villere asked.
DISLIKE: Facebook fell to one of the largest losses in the S&P 500 after the social-media giant said that it is revamping its system to show fewer posts from brands and fewer videos in favor of more posts from friends and family. The changes may result in people spending less time on Facebook, and less advertising revenue for the company.
Facebook dropped $8.41, or 4.5 percent, to $179.36.
CURRENCIES: The euro touched its highest level since 2014 against the dollar amid hopes for a new coalition government in Germany and signs that the European Central Bank is preparing to rein in its stimulus sooner than many had been predicting.
The euro jumped to $1.2182 from $1.2036 late Thursday. The British pound rose to $1.3734 from $1.3536, and the dollar slipped to 111.03 Japanese yen from 111.09 yen.
MARKETS ABROAD: Japan's Nikkei 225 index lost 0.2 percent, South Korea's Kospi advanced 0.3 percent and Hong Kong's Hang Seng jumped 0.9 percent.
France's CAC 40 gained 0.5 percent, the FTSE 100 in London rose 0.2 percent and Germany's DAX climbed 0.3 percent.
COMMODITIES: Benchmark U.S. crude rose 50 cents to settle at $64.30 per barrel. Brent crude, the international standard, gained 61 cents to $69.87 per barrel.
Natural gas gained 12 cents to $3.20 per 1,000 cubic feet, heating oil added a penny to $2.09 per gallon and wholesale gasoline rose 1 cent to $1.85 per gallon.
Gold rose $12.40 to settle at $1,334.90 per ounce, silver added 18 cents to $17.14 per ounce and copper dipped a penny to $3.22 per pound.