U.S. equities closed higher in choppy trade on Friday after Donald Trump took a protectionist tone in his first speech as president.
"We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs," Trump said after being sworn in. "Protection will lead to great prosperity and strength. I will fight for you with every breath in my body and I will never ever let you down."
The Dow Jones industrial average gained about 95 points after rising 111.54 points at session highs, with Procter & Gamble, Merck and IBM contributing the most gains. The blue-chips index also snapped a five-day losing streak.
"It was a very populist speech. He spoke to the Heartland; he spoke to those who voted for him," said Quincy Krosby, market strategist at Prudential Financial. "Clearly, it was not what a lot of people were expecting. It was vintage Trump.
The S&P 500 gained 0.3 percent, with telecommunications and materials leading advancers. The Nasdaq composite advanced 0.28 percent. The three major indexes had traded more than half a percent higher ahead of Trump's speech.
S&P intraday chart
"He didn't decide to go high. He decided to go populist and protectionist, and that's something we're going to have to get used to. When you put together populism and protectionism, it has a lot of economic fallout. That's how he got here," said aid Art Hogan, chief market strategist at Wunderlich Securities. "We were going higher on the hopes of thing that take time to happen in Washington."
The broader stock market has rallied significantly since Trump's shocking electoral victory on the hopes of more government spending, lower corporate taxes and deregulation of some sectors.
Stocks, however, have traded mostly sideways for the past month as investors look for more details about Trump's proposed policies.
The Trump administration will have to start delivering on these expectations for stocks to remain at current levels, said Naeem Aslam, chief market analyst at Think Markets. "Traders are no longer going to monitor his words closely, but the actual actions. The bigger question is if he can get the Congress to wear the same hat," he said.
Equities had pulled back slightly leading up to the inauguration, with the benchmark indexes all tracking for weekly losses heading into Friday's session.
"What I've noticed over the past couple of days is we've seen a lot of activity in put options," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. "What this tells me is people are preparing for a pullback, which may not happen."
"We saw something similar happen ahead of the election," Frederick said. "The first 100 days are going to be critical. We've got pretty high expectations for GDP and, if they are met, there is room for valuation expansion."
Expectations for a stronger economy have not only been bolstered by policy hopes from the new administration, but also by the slew of better-than-expected economic data.
Weekly jobless claims remain around their lowest levels in decades, while the consumer price index rose 2.1 percent in December on a year-over-year basis. In fact, the Citi U.S. Economic Surprise index has risen to its highest level since 2014. A higher reading on the index indicates more positive economic data surprises.
Citi U.S. Economic Surprise index 3-year chart
Jeff Zipper, managing director of investments at the Private Client Reserve of U.S. Bank, said the economic backdrop is bullish for stocks. He added, however, "the market is definitely looking for some clarity" on Trump's policy plans.
There are no major economic data due Friday. Philadelphia Federal Reserve President Patrick Harker said in a speech the U.S. labor participation rate is lower than he would like, and is holding down productivity and growth.
In corporate news, earnings season continued as Dow components General Electric and Procter & Gamble both reported quarterly results. GE posted in-line adjusted earnings per share while revenue came slightly below estimates. P&G's results topped estimates on both the top and bottom lines.
U.S. Treasury yields gave back some gains Friday after Trump's speech, with the benchmark 10-year note yield trading around 2.489 percent and the two-year note yield near 1.19 percent.
"The truth is we don't know where this is going," said John Bredemus, vice president for Allianz Investment Management. "Uncertainty is not just on the Trump administration, it's also on monetary policy as the Fed steps back."
Overseas, European equities traded mostly flat ahead of the inauguration, with the pan-European Stoxx 600 index falling just 0.07 percent. In Asia, stocks closed mixed, as the Korean Kospi fell 0.35 percent, while the Shanghai composite advanced 0.7 percent.
The rose 7.62 points, or 0.34 percent, to end at 2,271.31, with telecommunications leading nine sectors higher and industrials and health care lagging.
The Nasdaq composite advanced 15.25 points, or 0.28 percent, to close at 5,555.33.
About nine stocks advanced for every five decliners at the New York Stock Exchange, with an exchange volume of 980.63 million and a composite volume of 3.502 billion at the close.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 11.5.