US STOCKS-S&P 500, Nasdaq rally, post second weekly gain

* Investors rotate out of growth into value stocks
* Disney drops after strong run up to results
* PayPal extends rise as brokerages upbeat after investor
day

(Adds 4 p.m. close)
By Herbert Lash
NEW YORK, Feb 12 (Reuters) - 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 U.S.
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 .SPNY , financials .SPSY and materials
.SPLRCM sectors rose on expectations they will benefit from a
reopened economy, while heavyweights Apple Inc AAPL.O , Tesla
Inc TSLA.O and Microsoft Corp MSFT.O were lower most of the
session.
Value and cyclicals outperform in a rising interest rate,
higher-growth environment, which the U.S. 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.
A sharp drop in new COVID-19 cases and hospitalizations 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 U.S. 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 U.S. economy is expected to reach
pre-COVID-19 levels within a year as the proposed $1.9 trillion
fiscal bill helps boost economic activity, but employment will
likely take more than a year to fully recover. U.S. President Joe Biden turned to a bipartisan group of
local officials for support on his $1.9 trillion coronavirus
relief plan to help millions of unemployed workers and for
schools to reopen. The Lipper data late on Thursday showed U.S.-based stock
funds attracted $22.9 billion in the week to Wednesday, the
largest weekly inflow since March 2008. U.S. stock markets will be closed on Monday on account of
the U.S. Presidents Day holiday.
Unofficially, the Dow Jones Industrial Average .DJI rose
28.29 points, or 0.09%, to 31,458.99, the S&P 500 .SPX gained
18.61 points, or 0.48%, to 3,934.99 and the Nasdaq Composite
.IXIC added 69.70 points, or 0.5%, to 14,095.47.
The small-cap index .RUT rose for the fifth week out of
six full weeks this year. PayPal Holdings Inc PYPL.O rose
after several brokerages raised their price targets following
the payments company's investor day call a day earlier.
Walt Disney Co DIS.N reported a surprise quarterly profit.
However, its shares fell from a record high after a more than
13% run up to its results over the last two weeks. Dating app operator Bumble Inc BMBL.O jumped, a day after
a stellar debut sent its shares up more than 75%. Chief
Executive Officer Whitney Wolfe Herd's stake in the
women-centric dating app operator was worth nearly $2 billion.