| | | Wall Street closes volatile week on higher note
16-Aug-19 16:15 ET
Dow +306.62 at 25885.99, Nasdaq +129.38 at 7896.01, S&P +41.08 at 2888.68
briefing.com
[BRIEFING.COM] The stock market finished decisively higher on this options expiration Friday. A buy-the-dip mindset helped boost the S&P 500 (+1.4%), Dow Jones Industrial Average (+1.2%), and Nasdaq Composite (+1.7%) each over 1.0%. The Russell 2000 increased 2.2%.
The market jumped out of the gate amid several positive considerations that helped investors return to equities after a volatile week. Some of those included an understanding that the U.S. consumer is still in good shape, President Trump declaring that he will have a call with President Xi soon (no specific date was mentioned), and other governments continuing to signal efforts to stimulate growth.
Given the 3% stock market sell-off earlier this week, and the lack of bad news today, conditions may have also been primed for a bounce. All 11 S&P 500 sectors finished higher with most of the leadership concentrated among the cyclical sectors, which were hit the hardest this week.
Nine sectors increased by at least 1.0%, including near 2.0% gains in the industrials (+1.9%), information technology (+1.9%), and financials (+1.9%) sectors. The real estate (+0.6%) and utilities (+0.4%) sectors rose modestly.
Industrial components Deere & Company (DE 149.23, +5.52, +3.8%) and General Electric (GE 8.79, +0.78, +9.7%) greatly benefited from a buy-the-dip mindset. Deere missed earnings estimates and lowered its full-year guidance, which sent shares down nearly 4% prior to the open, but shares still finished higher. GE, meanwhile, bounced back from yesterday's 11% drop that followed allegations of accounting fraud.
High-beta groups like the Dow Jones Transportation Average (+2.1%), the Philadelphia Semiconductor Index (+2.8%), and the iShares Nasdaq Biotechnology ETF (IBB 104.97, +2.29, +2.2%) each advanced over 2%. The semiconductor space was boosted by a positive reaction to better-than-expected earnings results from NVIDIA (NVDA 159.56, +10.79, +7.3%).
Despite the rally in equities, demand for U.S. Treasuries held firm amid lingering growth concerns. The 2-yr yield declined two basis points to 1.47%, and the 10-yr yield increased one basis point to 1.54%. The U.S. Dollar Index was unchanged at 98.18. WTI crude increased 0.5% to $54.89/bbl.
Reviewing Friday's economic data, which including the Housing Starts and Building Permits report for July and the preliminary August reading for the University of Michigan Index of Consumer Sentiment:
- Total housing starts declined 4.0% m/m to a seasonally adjusted annual rate of 1.191 million units (Briefing.com consensus 1.245 million), although single-family starts rose 1.3% m/m to 876,000. Total building permits increased 8.4% m/m to 1.336 million (Briefing.com consensus 1.260 million), driven almost entirely by a 24.8% increase in permits for dwellings with five or more units. Single-family permits were up 1.8% to 838,000.
- The key takeaway from the report is that the supply of new single-family homes remains constrained, which should continue to put a damper on overall housing sales due to supply/price constraints.
- The preliminary University of Michigan Consumer Sentiment report for August checked in at 92.1 (Briefing.com consensus 97.7) versus the final reading of 98.4 for July. The August number was the lowest reading since January.
- The key takeaway from the report was the finding that apprehension about the economic outlook increased with the Fed's rate cut, which is something that might influence consumers to curtail their discretionary spending activity.
Investors will not receive any notable economic data on Monday.
- Nasdaq Composite +19.0% YTD
- S&P 500 +15.2% YTD
- Dow Jones Industrial Average +11.0% YTD
- Russell 2000 +10.8% YTD
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