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Nasdaq, S&P 500 Turn Positive But Dow Closes Lower - U.S. Commentary


After coming under pressure early in the session, stocks showed a significant turnaround over the course of the trading day on Friday. The major averages bounced well off their lows of the session, with the Nasdaq and the S&P 500 climbing into positive territory.

The major averages ended the session mixed, as the Dow climbed well off its worst levels but was unable to turn positive. While the Dow fell 70.92 points or 0.3 percent to 24,538.06, the Nasdaq jumped 77.31 points or 1.1 percent to 7,257.87 and the S&P 500 climbed 13.58 points or 0.5 percent to 2,691.25.

Despite the recovery on the day, the major averages all moved lower for the week. The Dow plunged by 3 percent, the S&P 500 tumbled by 2 percent and the Nasdaq slumped by 1.1 percent.

Bargain hunting may have contributed to the rebound on Wall Street, as the early weakness came on the heels of the sharp pullback seen over the three previous sessions.

The initial drop came as traders expressed concerns about the impact President Donald Trump's plans to impose new tariffs on steel and aluminum imports will have on global trade.

Trump indicated Thursday that he plans to impose a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports.

The tariffs are likely to benefit U.S. steel and aluminum producers, although some officials have warned of retaliation by the European Union and China.

Trump shrugged off the concerns in a post on Twitter early Friday morning, calling trade wars "good" and "easy to win"

"When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win," Trump said.

He added, "Example, when we are down $100 billion with a certain country and they get cute, don't trade anymore-we win big. It's easy!"

Following Trump's announcement, several industry groups warned that the tariffs would lead to increased costs and hamper their ability to create jobs.

A steep drop by shares of McDonald's (MCD) weighed on the Dow, with the fast food giant slumping by 4.8 percent.

The drop by McDonald's came after RBC Capital Markets cut its price target on the company's stock to $170 from $190 after a slow start for the chain's new value menu.

Sector News

Biotechnology stocks showed a substantial move to the upside on the day, driving the NYSE Arca Biotechnology Index up by 3.2 percent. The index rebounded after closing lower for three straight sessions.

Biogen (BIIB) and AbbVie (ABBV) turned higher despite voluntarily withdrawing their relapsing multiple sclerosis drug Zinbryta from the global markets.

Significant strength also emerged among natural gas stocks, as reflected by the 2.3 percent gain posted by the NYSE Arca Natural Gas Index. The strength in the sector came despite a modest decrease by the price of natural gas stocks.

Tobacco, semiconductor, and healthcare stocks also moved notably higher, while steel stocks pulled back following the strength seen in the previous session.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw significant weakness during trading on Friday. Japan's Nikkei 225 Index plunged by 2.5 percent, while Hong Kong's Hang Seng Index dove by 1.5 percent.

The major European markets also moved sharply lower on the day. While the U.K.'s FTSE 100 Index tumbled by 1.5 percent, the German DAX Index and the French CAC 40 Index plummeted by 2.3 percent and 2.4 percent, respectively.

In the bond market, treasuries pulled back after showing a strong move to the upside in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 5.3 basis points to 2.857 percent.

Looking Ahead

The Labor Department's monthly jobs report is likely to be in focus next week, potentially overshadowing reports on international trade, factory orders, and private sector employment.

Next Wednesday, the Federal Reserve is scheduled to release its Beige Book, a compilation of anecdotal evidence on economic conditions in the twelve Fed districts that may shed light on the outlook for interest rates.

On the earnings front, Ciena (CIEN), Target (TGT), H&R Block (HRB), Abercrombie & Fitch (ANF), Costco (COST), Kroger (KR), Sears (SHLD), and Big Lots (BIG) are among the companies due to report their quarterly results next week.

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