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The S&P 500 and Nasdaq set record closing highs on Friday as investors bought energy, financial and materials shares and sold big tech stocks in anticipation of new fiscal aid from Washington to help the US economy recover.

The major indices traded in a tight range during the week in which investors rotated out of growth-oriented stocks that have dominated an almost year-long rally and bought cyclical and under-priced value stocks.

The S&P energy, financials and materials sectors rose on expectations they will benefit from a reopened economy, while heavyweights Apple, Tesla and Microsoft were lower most of the session. All three closed higher in a late market surge.

Value and cyclicals outperform in a rising interest rate, higher-growth environment, which the US economy is on the cusp of entering, said Thomas Hayes, chairman and managing member of hedge fund Great Hill Capital LLC in New York.

“We’re under-estimating the lag effect of all the money in the system as more and more vaccinations are delivered and as more of the country reopens” from business shutdowns, he said.

“We are continuing this rotation that would be consistent with the new business cycle, and as (bond) yields go up, value and cyclicals will lead,” Hayes said.

The Cboe Volatility Index, Wall Street’s so-called fear gauge, closed below 20 for first time since February 2020.

A sharp drop in new Covid-19 cases and hospital admissions in recent weeks have helped drive markets to new highs, though a near-term pullback could occur from the new coronavirus variants and potential snags in vaccine distributions.

The latest data showed US consumer sentiment unexpectedly fell in early February as households were still worried about the economy despite expectations for additional stimulus.

A Reuters poll showed the US economy is expected to reach pre-Covid-19 levels within a year as the proposed US$1.9 trillion fiscal bill helps boost economic activity, but employment will likely take more than a year to fully recover.

US President Joe Biden turned to a bipartisan group of local officials for support on his US$1.9 trillion coronavirus relief plan to help millions of unemployed workers and for schools to reopen.

US stock markets will be closed on Monday for the Presidents Day holiday.

The S&P 500 set hit an all-time peak on Friday, while the Nasdaq and Dow did earlier in the week

The Dow Jones Industrial Average rose 0.09 percent, to 31,458, the S&P 500 gained 0.47 percent, to 3,935 and the Nasdaq added 0.5 percent, to 14,095. (Reuters)