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Major Averages Close Mixed On The Day But Higher For The Week - U.S. Commentary


After moving notably higher over the course of the two previous sessions, stocks turned in a lackluster performance during trading on Friday. The major averages spent the day bouncing back and forth across the unchanged line.

The Dow and the S&P 500 reached their best closing levels in nearly two months, but the Nasdaq closed marginally lower. While the Nasdaq edged down 2.09 points or less than a tenth of a percent to 7,402.88, the Dow climbed 91.64 points or 0.4 percent to 24,831.17 and the S&P 500 rose 4.65 points or 0.2 percent to 2,727.72.

Despite the mixed performance on the day, the major averages all moved sharply higher for the week. The Nasdaq surged up by 2.7 percent, and the Dow and the S&P 500 jumped by 2.3 percent and 2.4 percent, respectively.

The markets initially benefited from the upward momentum seen in the two previous sessions, but buying interest waned as traders seemed wary of continuing to pick up stocks.

Traders were also digesting President Donald Trump's outline of his plan to reduce high drug prices, which he has previously described as a top priority for his administration.

In remarks from the White House rose garden, Trump suggested the government was partly to blame for high drug prices but also criticized drug lobbyists and so-called "middle men."

Trump announced several steps his administration will take to reduce drug prices, including giving Medicare Part D plans better tools to negotiate discounts.

Reports earlier in the day indicated Trump's reforms of Medicare will stop short of allowing the government to negotiate directly with drug makers.

The president also indicated he would seek to increase competition in drug markets, develop new incentives for drug makers to lower list prices and develop options to lower patients' out-of-pocket spending.

On the U.S. economic front, the Labor Department released a report showing import prices increased by less than expected in the month of April.

The Labor Department said import prices rose by 0.3 percent in April after edging down by a revised 0.2 percent in March. Economists had expected import prices to climb by 0.5 percent.

Meanwhile, the report said export prices increased by 0.6 percent in April after rising by 0.3 percent in March. Export prices had been expected to rise by another 0.3 percent.

A separate report released by the University of Michigan showed consumer sentiment unexpectedly held steady in early May.

The report said the preliminary reading on the consumer sentiment index for May came in at 98.8, unchanged from the final April reading. Economists had expected the index to edge down to 98.5.

Sector News

Many of the major sectors ended the day showing only modest moves, contributing to the lackluster close by the broader markets.

Biotechnology stocks showed a significant move to the upside, however, with the NYSE Arca Biotechnology Index jumping by 1.8 percent.

Healthcare and pharmaceutical stocks also saw considerable strength as traders reacted to Trump's plan to reduce drug prices.

On the other hand, tobacco stocks moved notably lower on the day, dragging the NYSE Arca Tobacco Index down by 1 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index jumped by 1.2 percent, while China's Shanghai Composite Index fell by 0.4 percent.

The major European markets also turned mixed on the day. While the U.K.'s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index edged down by 0.1 percent and 0.2 percent, respectively.

In the bond market, treasuries showed a lack of direction before closing roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day unchanged at 2.971 percent.

Looking Ahead

Economic data is likely to attract attention next week, with traders likely to keep an eye on reports on retail sales, homebuilder confidence, housing starts and industrial production.

On the earnings front, Wal-Mart (WMT), Home Depot (HD), Macy's (M), Cisco Systems (CSCO), J.C. Penney (JCP), and Campbell Soup (CPB) are among the companies due to report their quarterly results next week.

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