Banks and smaller companies that were among the market’s laggards last quarter have helped stocks to their best January in 30 years, a sign investors are favoring sectors tied to the U.S. economy.
Despite a modest performance from U.S. indexes Thursday, the Dow Jones Industrial Average and the S&P 500 both closed the month with their biggest January gains since the 1980s. The industrial average’s 7.2% rise was its best January performance since 1989, while the S&P’s 7.9% advance was its best start to a year since 1987.
Through Wednesday, the KBW Nasdaq Bank Index had risen 14% this month, on track for its best-ever start to a year. Meanwhile, the Russell 2000 index of small-capitalization companies—many of which are domestically focused—was heading for its best January since 1987, with a 10% advance.
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