Pare stocks gain as volatile end of the week approaches
The S&P 500 bounced around the flat line on Friday in another volatile trading session, leaving the broad index at risk of falling for a second straight week.
Tech and other growth stocks gave up their earlier gains around noon, the same time bitcoin fell. The cryptocurrency has been hit again by a statement from Chinese authorities calling for a crackdown on mining and trade. Gains in financials, energy and industrials helped stabilize the S&P 500, leaving the index up 0.1%.
The Dow Jones Industrial Average maintained a modest gain, up about 165 points, or 0.5%, while the Nasdaq Composite fell 0.3%.
Friday’s lackluster performance leaves the S&P 500 down 0.3% in the last five trading days, marking another hectic trading week. The Dow, meanwhile, reduced its loss for the week to 0.4% and the Nasdaq remained up 0.6%, on track for its first weekly gain of the last five.
Stocks were hammered earlier in the week for three days of selling on growing fears that inflation will rise and remain elevated as the economy rebounds. Falling bitcoin prices haven’t helped.
The pressure began to ease on Wednesday afternoon after the Federal Reserve released the minutes of its latest policy meeting showing some officials were closely monitoring economic developments and would be ready to adjust monetary policy if necessary. Dow industrials lost as much as 587 points at one point in the session until the minutes helped narrow that drop to around 150 points.
Stocks got a bigger boost on Thursday, which seemed to spread somewhat into Friday’s trading session. Job application data, seen as an indicator of layoffs, has fallen to a new pandemic low, prompting investors to briefly buy down hard-hit risky assets, including growth stocks and cryptocurrencies.
Daily stock market swings are all signs that the market is tired as it grapples with a rebounding economy that threatens to eventually get hot, blazing inflation and foamy conditions among growth stocks, cryptocurrencies. and other assets, investors said.
“These are the two big topics the market is grappling with,” said Peter Bourbeua, portfolio manager at ClearBridge Investments, adding that market declines could “get a lot more painful from here”.
After data on Friday showed manufacturing activity continued to rise, investors focused their bets on sectors, including banking and energy, that could benefit from the economy rebounding to levels of before the pandemic.
The US Composite Production Index climbed to its highest level ever, surpassing the previous record in April as business activity grew rapidly.
“If we can get a combination of confidence that inflation is under control and signs of economic momentum ahead, I think there are still good opportunities to be seized, in the type of reopening of sectors in particular,” Mr. Ganesh said. Stocks that performed poorly during the pandemic could become the new drivers that will drive major indices higher, he added.
S&P 500 financial stocks rose 0.9%, while energy company stocks rose 0.7%. Industrials and materials also traded higher, each gaining 0.5%.
Shares of tech companies, meanwhile, fell 0.3%, while consumer discretionary stocks fell 0.4%. Netflix and Google Parent Alphabet both traded in the red after ditching previous gains. Tesla stock, which also slipped from its session highs, remained up just 0.1%.
Other drivers included oat milk maker Oatly, which grew more than 8%. The shares jumped 19% when they debuted on Thursday. And shares of Nvidia rose 2.7% after the chipmaker unveiled its 4-for-1 stock split plan.
“The context this week is that the markets are tired,” said Paul O’Connor, head of a multi-asset team at Janus Henderson. “Stocks lose momentum, speculative areas of the market lose momentum.”
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