U.S. stocks were on the rise Friday, but Wall Street was still on track for weekly losses, as U.S. Treasury yields recovered from multi-year lows and investors continued to track U.S.-China trade negotiations.
Trading has been volatile this week with investors buffeted by good U.S. economic data offset by the ongoing dispute between the U.S. and China over trade policy which has dampened some company earnings and hit the farm sector in particular.
By Friday afternoon, the Dow was on pace for its 8th one day 1% move of the month, the most 1% moves since December 2018 when it had 12 days that saw 1% moves in either direction. Similarly, the S&P 500 index was likely to see its 7th one day 1% move of the month, the most 1% moves in either direction since December 2018 when it had 10 such moves.
How are the major benchmarks faring?
The Dow Jones Industrial Average
rose 292 points, or 1.1%, to 25,875, while the S&P 500 index
added 42 points, or 1.5%, to 2,889. The Nasdaq Composite index
gained 132 points, or 1.7%, to 7,902.
Stocks end mostly higher Thursday, taking back a portion of Wednesday’s selloff which saw the biggest one day sell off so far this year. The Dow on Thursday rose 99.97 points, or 0.4%, to end at 25,579.39, while the S&P 500 rose 7 points, or 0.3%, to 2,847.60. The Nasdaq Composite bucked the trend, ending at 7,766.62, a decline of 7.32 points, or 0.1%.
What’s driving the market?
Wall Street staged a relief rally Friday, following a volatile week of trade dominated by concerns about rising U.S.-China trade policy tensions, weakening global economic growth, and falling bond yields.
“Market players off loaded riskier assets like a hot potato and rushed to perceived safe havens like bonds and gold as trade tensions and global growth fears promoted risk aversion” earlier this week, said Lukman Otunuga, senior research analyst at FXTM, in a note. “Although Treasury yields are climbing away from record lows on Friday as some tranquility returns to markets, the movements in the bond markets are poised to remain on investors radars in the week ahead.”
A brief inversion Wednesday of the main measure of the yield curve, with the 10-year yield dipping below the 2-year, was blamed for contributing to a stock-market rout. An overall decline in yields, tied in part to a global flight to safety amid economic worries, also added to the gloom, analysts said. On Friday, the 10-year yield
was up 2.6 basis points at 1.558%. Yields and debt prices move in opposite directions.
Some analysts also tied support for stocks on Friday to hope for more stimulus from central banks. China’s state planner said it would introduce a plan to support disposable income this year and in 2020 in an effort to boost consumption, Reuters reported. Credit rating agency Fitch noted that more than a third of central banks have loosened monetary policy in the past six months.
President Donald Trump on Thursday said he expected the U.S.-China trade dispute to be short and that September talks were still scheduled to go ahead despite the altercation between Trump and China recently. China on Thursday said it was prepared to take unspecified steps in response to Trump’s decision earlier this month to impose additional tariffs on imports of Chinese goods beginning Sept. 1.
On the economic data front, U.S. housing starts fell 4% to an annual rate of 1.19 million, the Commerce Department said Friday. Building permits, however, rose 8.4% to an annual rate 1.34 million, surpassing the consensus estimate of 1.29 million starts, according to a MarketWatch poll of economists.
“While the headline number is showing consistent weakness, when you dig into it, we’ve got a mixed read,” wrote Mike Loewengart vice president of investment strategy at E-Trade, in an email. “The pop in single-family home building, which is really the largest component of the housing market, gives us a reason to be optimistic.”
The University of Michigan’s consumer sentiment survey fell to 92.1 in August from 98.4 in July, below expectations of 96.8, per a MarketWatch poll of economists.
Which stocks are in focus?
Shares of farm-equipment maker Deere & Co.
was up Friday after it topped expectations for revenues, but fell short on earnings.
issued second-quarter earnings after the close Thursday that beat Wall Street expectations for the second quarter. The company surpassed estimates for both earnings and revenue for the quarter following several quarters of weak performance for the company and the chip-making industry more broadly, which had lead Nvidia’s stock to fall 22% between April and Friday’s close. Shares rose 6.9% early Friday.
Fellow semiconductor firm Applied Materials Inc.
also reported better-than-expected fiscal third-quarter earnings and revenues late Thursday, though it provided slightly weaker-than-hoped earnings guidance for the fourth quarter.
had its worst day in 11 years Thursday on Madoff whistleblower’s fraud claims, but bounced Friday after CEO Larry Culp called the accusation “market manipulation” and bought nearly $2 million worth of the company’s stock.
How are other markets trading?
Stocks closed higher in Asia Friday, with the China CSI 300
adding 0.5%, Japan’s Nikkei 225
rising 0.1% and Hong Kong’s Hang Seng index
In Europe, stocks were on the rise, with the pan-European Stoxx Europe 600 adding 1.3%.
U.S. Treasury yields followed their German counterparts higher after Der Spiegel reported that Berlin would be willing to run fiscal deficits during a recession, citing sources in the German Chancellery and the finance ministry. The 10-year note yield
was up 6 basis points to 1.58% after seeing a two year low earlier this week.
In commodities markets, the price of crude oil
was up 0.2% to nearly $54.57 per barrel, for a gain for the week, even though OPEC lowered its outlook for crude demand.
fell back from a six year high to around $1,523.80 but remained on track for a third weekly gain.
The ICE U.S. dollar index
, meanwhile, was little changed near two year highs seen earlier this month.