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U.S. Stocks Close Mixed After Seeing Initial Weakness

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Stocks showed a notable move to the downside at the start of trading on Friday but managed to regain ground over the course of the session. The major averages climbed well off their lows, although only the tech-heavy Nasdaq managed to reach positive territory.

The major averages came under pressure going into the close, but the Nasdaq held on to a modest gain. While the Nasdaq inched up 12.15 points or 0.1 percent to a record closing high of 13,543.06, the Dow slid 179.03 points or 0.6 percent to 30,996.98 and the S&P 500 fell 11.60 points or 0.3 percent to 3,841.47.

For the holiday-shortened week, the Nasdaq spiked by 4.2 percent, the S&P 500 jumped by 1.9 percent and the Dow rose by 0.6 percent.

Profit taking contributed to the initial weakness on Wall Street, as some traders looked to cash in on the recent run to new record highs.

Selling pressure waned over the course of the session, however, as traders shrugged off uncertainty about President Joe Biden's proposed $1.9 trillion coronavirus relief package.

Optimism about more stimulus has helped propel stocks higher recently, although traders seemed unfazed by moderate Republican Senators Mitt Romney and Lisa Murkowski both expressing skepticism about the proposal.

Romney and Murkowski both pointed to the recently approved $900 billion stimulus and raised questions about whether more relief is needed.

Democrats could attempt to pass a new stimulus bill without Republican support by the so-called reconciliation process, which only requires a majority.

However, Democratic Senator Joe Manchin has also expressed concerns about the cost of increasing the size of direct payments to individuals to $2,000 from $600.

The negative sentiment may have been partly offset by a report from the National Association of Realtors showing an unexpected rebound in existing home sales in the month of December.

NAR said existing home sales climbed by 0.7 percent to an annual rate of 6.76 million in December after tumbling by 2.2 percent to a revised rate of 6.71 million in November.

The rebound surprised economists, who had expected existing home sales to slump by 2.1 percent to a rate of 6.55 million from the 6.69 million originally reported for the previous month.

With the unexpected monthly increase, existing home sales in December were up by 22.2 percent compared to the same month a year ago.

"Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," said Lawrence Yun, NAR's chief economist.

He added, "What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market."

Sector News

Semiconductor stocks showed a significant move to the downside on the day, dragging the Philadelphia Semiconductor Index down by 1.8 percent.

Industry giant Intel (INTC) led the sector lower after jumping late in the previous session after reporting better than expected fourth quarter results just before the close of trading.

Intel released its quarterly results ahead of schedule following reports that a graphic in its earnings statement had been the object of unauthorized access.

Considerable weakness was also visible among computer hardware stocks, with the NYSE Arca Computer Hardware Index falling by 1.4 percent after ending the previous session at a record closing high.

Shares of IBM Corp. (IBM) fell sharply after the tech giant reported better than expected fourth quarter earnings but on revenues that missed analyst estimates.

On the other hand, biotechnology stocks turned in a strong performance on the day, driving the NYSE Arca Biotechnology Index up by 1.2 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.3 percent ,while Hong Kong's Hang Seng Index tumbled by 1.6 percent.

The major European markets also moved to the downside on the day. While the French CAC 40 Index slid by 0.6 percent, the U.K.'s FTSE 100 Index dipped by 0.3 percent and the German DAX Index edged down by 0.2 percent.

In the bond market, treasuries moved higher following the modest drop seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, slipped 1.8 basis points at 1.091 percent.

Looking Ahead

The Federal Reserve's monetary policy decision may attract attention next week along with reports on consumer confidence, durable goods orders, new home sales, and personal income and spending.

On the earnings front, 3M (MMM), American Express (AXP), General Electric (GE), Johnson & Johnson (JNJ), Verizon (VZ), Microsoft (MSFT), Boeing (BA), Apple (AAPL), Tesla (TSLA), and McDonald's (MCD) are among a slew of companies due to report their quarterly results next week.

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