Resilient U.S. Economy Fuels Best January For Stocks in 30 Years

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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