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U.S. Stocks Extend Upward Trend To Reach New Record Highs

wallstreet nov01 12jul19 lt

Extending the upward trend seen over the past few sessions, stocks moved mostly higher during the trading day on Friday. With the continued upward move, the major averages all ended the session at new record closing highs.

The major averages saw further upside going into the close, finishing the day at their best levels of the session. The Dow jumped 243.95 points or 0.9 percent to 27,332.03, the Nasdaq climbed 48.10 points or 0.6 percent to 8,244.14 and the S&P 500 rose 13.86 points or 0.5 percent to 3,013.77.

For the week, the Dow surged up by 1.5 percent, while the Nasdaq and the S&P 500 advanced by 1 percent and 0.8 percent, respectively.

The markets continued to benefit from renewed optimism about the Federal Reserve lowering interest rates as soon as its next meeting later this month.

Congressional testimony from Fed Chairman Jerome Powell indicating crosscurrents, such as trade tensions and concerns about global growth, have continued to weigh on the U.S. economic outlook helped spark the resurgence in optimism about a rate cut.

Powell's remarks triggered an upward trend on Wall Street that lifted the Dow above the 27,000 level for the first time ever.

Trading activity was somewhat subdued, however, as traders brace for the unofficial start of earnings season next week.

Citigroup (C), Goldman Sachs (GS), Johnson & Johnson (JNJ), JPMorgan (JPM), Wells Fargo (WFC), IBM (IBM), Netflix (NFLX), Microsoft (MSFT), and American Express (AXP) are among the slew of companies due to report their quarterly results.

Meanwhile, traders largely shrugged off a report from the Labor Department showing U.S. producer prices unexpectedly edged higher in the month of June.

The Labor Department said its producer price index for final demand inched up by 0.1 percent in June, matching the uptick seen in May. Economists had expected producer prices to come in unchanged.

Excluding food and energy prices, core producer prices climbed by 0.3 percent in June after rising by 0.2 percent in May. Core prices had been expected to show another 0.2 percent increase.

"The small gain in producer prices in June suggests the increase in tariffs on $200bn of imports from China has yet to generate a pick-up in inflation and confirms that underlying domestic inflationary pressures remain subdued," said Michael Pearce, Senior U.S. Economist at Capital Economics.

He added, "That should help ease any fears, following the June CPI figures released yesterday, that underlying consumer price inflation will rise back above 2%."

Sector News

Transportation stocks moved sharply higher over the course of the trading session, driving the Dow Jones Transportation Average up by 2.4 percent. With the jump, the average ended the session at its best closing level in two months.

Significant strength was also visible among semiconductor stocks, as reflected by the 1.9 percent gain posted by the Philadelphia Semiconductor Index.

Chemical, gold and steel stocks also saw notable strength on the day, moving higher along with most of the other major sectors.

On the other hand, pharmaceutical stocks extended the sell-off seen in the previous session, dragging the NYSE Arca Pharmaceutical Index down by 2 percent to its lowest closing level in over a month.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index edged up by 0.2 percent, while China's Shanghai Composite Index rose by 0.4 percent.

Meanwhile, the major European markets turned mixed over the course of the session. While the French CAC 40 Index climbed by 0.4 percent, the U.K.'s FTSE 100 Index and the German DAX Index both edged down by 0.1 percent.

In the bond market, treasuries moved modestly higher as the day progressed after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1.4 basis points to 2.106 percent.

Looking Ahead

As mentioned above, earnings news is likely to move in to the spotlight next week, with Citigroup due to kick things off with the release of its second quarter results before the start of trading next Monday.

Traders are also likely to keep an eye on the latest batch of economic news, including reports on retail sales, industrial production, housing starts and homebuilder confidence.

The Federal Reserve is also scheduled to release its Beige Book, which may shed additional light on the near-term outlook for interest rates.

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