* Investors rotate out of growth into value stocks
* Disney drops after strong run up to results
* PayPal extends rise as brokerages upbeat after investorday(Adds 4 p.m. close)
By Herbert Lash
NEW YORK, Feb 12 (Reuters) – The S&P 500 and Nasdaq setrecord closing highs on Friday as investors bought energy,financial and materials shares and sold big tech stocks inanticipation of new fiscal aid from Washington to help the U.S.economy recover.
The major indices traded in a tight range during the week inwhich investors rotated out of growth-oriented stocks that havedominated an almost year-long rally and bought cyclical andunder-priced value stocks.
The S&P energy, financials and materialssectors rose on expectations they will benefit from areopened economy, while heavyweights Apple Inc, TeslaInc and Microsoft Corp were lower most of thesession.
Value and cyclicals outperform in a rising interest rate,higher-growth environment, which the U.S. economy is on the cuspof entering, said Thomas Hayes, chairman and managing member ofhedge fund Great Hill Capital LLC in New York.
“We’re under-estimating the lag effect of all the money inthe system as more and more vaccinations are delivered and asmore of the country reopens” from business shutdowns, he said.
“We are continuing this rotation that would be consistentwith the new business cycle, and as (bond) yields go up, valueand cyclicals will lead,” Hayes said.
A sharp drop in new COVID-19 cases and hospitalizations inrecent weeks have helped drive markets to new highs, though anear-term pullback could occur from the new coronavirus variantsand potential snags in vaccine distributions.
The latest data showed U.S. consumer sentiment unexpectedlyfell in early February as households were still worried aboutthe economy despite expectations for additional stimulus.
A Reuters poll showed the U.S. economy is expected to reachpre-COVID-19 levels within a year as the proposed $1.9 trillionfiscal bill helps boost economic activity, but employment willlikely take more than a year to fully recover.
U.S. President Joe Biden turned to a bipartisan group oflocal officials for support on his $1.9 trillion coronavirusrelief plan to help millions of unemployed workers and forschools to reopen.
The Lipper data late on Thursday showed U.S.-based stockfunds attracted $22.9 billion in the week to Wednesday, thelargest weekly inflow since March 2008.
U.S. stock markets will be closed on Monday on account ofthe U.S. Presidents Day holiday.
Unofficially, the Dow Jones Industrial Average rose28.29 points, or 0.09%, to 31,458.99, the S&P 500 gained18.61 points, or 0.48%, to 3,934.99 and the Nasdaq Compositeadded 69.70 points, or 0.5%, to 14,095.47.
The small-cap index rose for the fifth week out ofsix full weeks this year. PayPal Holdings Inc roseafter several brokerages raised their price targets followingthe payments company’s investor day call a day earlier.
Walt Disney Co reported a surprise quarterly profit.However, its shares fell from a record high after a more than13% run up to its results over the last two weeks.
Dating app operator Bumble Inc jumped, a day aftera stellar debut sent its shares up more than 75%. ChiefExecutive Officer Whitney Wolfe Herd’s stake in thewomen-centric dating app operator was worth nearly $2 billion.
(Reporting by Herbert Lash, additional reporting by Medha Singhin Bengaluru; Editing by Maju Samuel and Diane Craft)