NEW YORK — Oil and gas companies led the stock market up Friday, helping the Standard & Poor’s 500 index notch its second-best week this year.
With little news to give them direction, traders continued to push indexes higher. That extended a rally from Wednesday when the Federal Reserve said it was in no hurry to hike interest rates.
“What a very crazy week,” said Sam Stovall, chief equity strategist at S&P Capital IQ.
Benchmark U.S. crude bounced up from recent lows, climbing $2.36 to settle at $56.52 a barrel in New York, as traders bet that a 6-month plunge in prices had gone too far. Chevron (CVX), Denbury Resources (DNR) and other energy companies led nine of the 10 sectors in the S&P 500 to gains.
Nike’s (NKE) stock dropped $2.24, or 2 percent, to $94.84. The maker of athletic apparel posted results that beat Wall Street’s forecasts late Thursday, but a drop in orders from Japan and developing markets in Asia overshadowed an otherwise strong quarter.
The S&P 500 (^GPSC) gained 9.42 points, or 0.5 percent, to 2,070.65, bringing its weekly gain to 3.4 percent.
The Nasdaq composite (^IXIC) picked up 16.98 points, or 0.4 percent, to 4,765.38, and the Dow Jones industrial average (^DJI) rose 26.65 points, or 0.1 percent, to 17,804.80.
At the start of the week, slumping oil prices and the state of the world economy were investors’ main worries. A plunge in the Russian currency, the ruble, added to a sense of unease.
The turnaround came Wednesday, when Janet Yellen, the Federal Reserve chairwoman, said she saw no reason to hike interest rates in early 2015 and that the central bank would be “patient” in deciding when to raise rates from near zero. Her comments eased concerns that the Fed would start raising rates when growth in other major economies has looked weak. Traders celebrated, driving the S&P 500 up 4.5 percent over two days.
“It’s just crazy volatility,” said Jim Paulsen, chief investment strategist and economist at Wells Capital Management. Paulsen pointed to the magnitude of the market’s turn. Before the Fed’s statement came out on Wednesday, the S&P 500 was on course for a second week of losses. Two days later, it closed out one of its best weeks this year.
Stock markets in Asia climbed in the wake of the big gains in Europe and the U.S. on Thursday. Japan’s Nikkei 225 jumped 2.4 percent, while South Korea’s Kospi added 1.7 percent. Hong Kong’s Hang Seng advanced 1.3 percent.
The major equity markets are finishing the trading year on a positive note thanks to Janet Yellen’s Christmas message.
“The major equity markets are finishing the trading year on a positive note thanks to Janet Yellen’s Christmas message,” said Neil MacKinnon, global macros strategist at VTB Capital. He said that with no major economic reports coming out, the markets will soon “switch into holiday mode,” as traders head off for vacations.
Back in the U.S., strong quarterly results from Red Hat, an open-source software company, drove its stock up 11 percent, the biggest gain in the S&P 500. Red Hat (RHT) reported better earnings and sales than analysts had expected late Thursday. Its stock soared $6.54 to $68.04.
CarMax (KMX) jumped 11 percent after the used-car dealership posted a 22 percent surge in its quarterly profits thanks to higher sales. The company’s results beat analyst estimates, sending its stock up $6.79 to $67.32.
U.S. government bond prices rose, nudging yields down. The yield on the benchmark 10-year Treasury note slipped to 2.16 percent.
In the commodity markets, gold edged up $1.20 to $1,196 an ounce, while silver added 10 cents to $16.03 an ounce. Copper rose 3 cents to $2.88 a pound.
Brent crude, a benchmark for international oils used by many U.S. refineries, rose $2.11 to close at $61.38 in London.
In other futures trading on the New York Mercantile Exchange:
Wholesale gasoline rose 3.3 cents to close at $1.560 a gallon.
Heating oil rose 2.3 cents to close at $1.962 a gallon.
Natural gas fell 17.8 cents to close at $3.464 per 1,000 cubic feet. Forecasts for a mild winter, have pushed natural gas to its lowest price since November 2013.
What to Watch Monday:
The National Association of Realtors reports existing home sales for November at 10 a.m. Eastern time.
If you don’t already have one, now’s the time to establish a traditional individual retirement account or a Roth IRA, and if you’re self-employed, a Solo 401K or SEP-IRA. Don’t worry if you don’t have enough money to fully fund the account. As long as you establish the account by the end of the calendar year, you’ll be able to retroactively contribute to it through April 15 of next year, and those funds can still count toward your 2014 taxes.
1. Open a 401K or IRA account
For 2014, you’re allowed to contribute up to $17,500 to your 401(k). (If you’re 50 and over, that limit increases to $23,000.) This is the maximum you’re able to save per year and still defer paying income tax on that money.
Since 401(k) contributions must be made through payroll deductions, talk to your company’s payroll department about adjusting your December contribution or adding a lump-sum amount from your holiday bonus when you receive it. Also, chat with your human resource department to see if it will let you retroactively earmark contributions made prior to April 15, 2015 for the 2014 tax year.
2. Max out your 401(k) contributions
If you’re age 70½ or older, you’re required to take a certain amount from your 401(k) and traditional IRA each calendar year. If you don’t, you could be facing sizable penalty fees from the IRS (as in 50 percent of the amount you should have taken out). To find out how much you should take out by the end of the year, talk to your financial adviser or see this calculator.
3. Take your required minimum distributions
You may qualify for a state income tax deduction by contributing to your children’s 529 college savings plan.While every state’s 529 tax deduction rules and contribution limits vary, most states will accept contributions until all account balances for the same beneficiary reach $235,000 to $412,000. Check with your state to discover your specific limits.
4. Contribute to a 529 plan
Depending on your financial situation, converting some of the funds from your traditional IRA into a Roth IRA could be a smart strategy. You’re able to withdraw the funds from a Roth IRA tax-free, and Roth IRAs are excluded from required minimum distribution rules. Furthermore, if you’re ineligible to contribute to a traditional or Roth IRA due to income limitations, you can still contribute to a "nondeductible" traditional IRA and then process what’s known as a "backdoor" Roth conversion.
5. Think about a Roth IRA conversion
When you sell stocks for a gain, you face capital gains taxes. But you can counterbalance these gains by selling some of your "losing" stocks and writing off the losses. Talk with your accountant about whether this strategy would work for you; if it will, you need to harvest your losses before the year closes out.
6. Consider tax loss harvesting
Do you have a flexible spending account, or FSA, at work? Check the detail of your company’s policy; many are "use it or lose it," meaning if you don’t use the full amount in your FSA by year’s end, that money will not roll over.
New federal laws permit employers to let their workers roll over a maximum of $500, but it’s the employers choice whether or not to allow this rollover. Also, some employers give their workers a grace period until March of the following year to use the prior year funds, while other employers require that the funds are used by Dec 31. Check with your HR department to learn your employers’ rules.
Remember that FSA funds can be used for a lot more than just prescriptions and co-pays. If you have money you need to spend before it’s gone, you may also be able to use it for things like dental work, glasses or contact lenses, and even some qualified over-the-counter medicine and supplies.
7. Use your FSA funds
Secure some additional tax deductions for 2014 by donating to a charitable cause. As long as you itemize your donations, you can claim everything from cash donations to goods to used vehicle donations. You can even give some of your stock to charity, thus avoiding capital gains tax.
Just be sure to get a signed and dated receipt from the charity, noting the amount of your contribution — especially if you’re donating goods instead of cash. As an added precaution, take photographs of any high-value donations (over $250).
8. Donate to charity
You may qualify for another tax credit by making energy-efficient home improvements like windows, insulation and roofing. You’ll also save more in the long run on your home’s heating and cooling costs. To see which improvements qualify for a tax credit, go to the federal government’s energy savings website, which lists comprehensive details that are broken down state-by-state.
9. Make your home more energy-efficient
If you need to enroll for coverage on the healthcare exchanges, you have until Dec. 15, 2014 to sign up for coverage that begins on Jan. 1, 2015. If you’re already enrolled in a marketplace plan, you may be able to change your coverage if you’ve had a qualifying life event, such as a marriage or a move to another state.
10. Sign up for health insurance
You can give up to $14,000 to individuals per year without needing to file a gift tax return. If you’re married, you and your spouse can each bequeath gifts of $14,000 to an individual without triggering a taxable event. If you decide to give a major financial gift to your children, talk to your kids first about strong money-management skills. Here’s a free guide to help to talk to your kids about money.
Giving a little bit each year can also help reduce your overall estate tax burden (although the estate tax exemption is $5.34 million in 2014, which means few taxpayers will need to worry about this).
11. Gift your wealth
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