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Stocks Finish Firmly Positive Following Volatile Session - U.S. Commentary


Following the sell-off seen in the previous session, stocks saw substantial volatility over the course of the trading session on Friday. The major averages showed wild swings as the day progressed before closing notably higher.

The major averages pulled back off their highs going into the close but remained in positive territory. The Dow surged up 330.44 points or 1.4 percent to 24,190.90, the Nasdaq jumped 97.33 points or 1.4 percent to 6,874.49 and the S&P 500 shot up 38.55 points 1.5 percent to 2,619.55.

Despite the advance on the day, the major averages moved sharply lower for the week. The Nasdaq plummeted by 5.1 percent, while the Dow and the S&P 500 both plunged by 5.2 percent.

The higher close on Wall Street was partly due to bargain hunting after the steep losses seen in the previous session dragged the major averages down to their lowest closing levels in about two months.

Traders may also have reacted positively to news that lawmakers managed to end a brief government shutdown with a bill raising spending caps and funding the government until March 23rd.

However, the volatility over the course of the session came amid lingering concerns about the outlook for interest rates.

Recent signs of rising inflation have led to worries that the Federal Reserve may raise rates faster than previously anticipated.

Traders largely shrugged off a report from the Commerce Department showing wholesale inventories increased by more than expected in the month of December.

The Commerce Department said wholesale inventories rose by 0.4 percent in December after climbing by a revised 0.6 percent in November. Economists had expected inventories to edge up by 0.2 percent.

Sector News

Semiconductor stocks showed a significant move to the upside on the day, driving the Philadelphia Semiconductor Index up by 3.1 percent. The index rebounded after ending the previous session at its lowest closing level in four months.

Graphics chipmaker Nvidia (NVDA) posted a standout gain after reporting better than expected fourth quarter results and providing upbeat guidance.

Telecom, utilities and financial stocks also saw considerable strength, contributing to the higher close by the broader markets.

On the other hand, substantial weakness was visible among gold stocks, as reflected by the 2.2 percent slump by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for April delivery fell $3.30 to $1,315.70 an ounce.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region followed Wall Street sharply lower on Friday. Japan's Nikkei 225 Index plunged by 2.3 percent, while Hong Kong's Hang Seng Index crashed by 3.1 percent.

The major European markets also showed notable moves to the downside. While the U.K.'s FTSE 100 Index slumped by 1.1 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.3 percent and 1.4 percent, respectively.

In the bond market, treasuries ended the day modestly higher but off their best levels. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, dipped by 2.2 basis points to 2.829 percent.

Looking Ahead

Economic data is likely to attract attention next week, with reports on producer and consumer prices likely to be in focus amid recent concerns about rising inflation.

Reaction to reports on retail sales, industrial production, housing starts, and homebuilder confidence may also impact trading.

On the earnings front, PepsiCo (PEP), MetLife (MET), Groupon (GRPN), Cisco (CSCO), Coca-Cola (KO), and Kraft Heinz (KHC) are among a slew of companies due to report their quarterly results next week.

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