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Market Snapshot: Stocks close higher and Nasdaq retakes 13,000 as investors aim to push past messy rotation

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U.S. stock benchmarks closed sharply higher Friday afternoon, allowing the Dow and S&P 500 index to avoid booking a second straight weekly loss, even as rising bond yields and concerns about the global economic recovery keep investors on edge.

How did stock benchmarks perform?
  • The Dow Jones Industrial Average
    DJIA,
    +1.39%

    rose 453.40 points, or 1.4%, to close at 33,072.88.
  • The S&P 500 index
    SPX,
    +1.66%

    jumped 65.02 points, or 1.7%, to settle at 3,974.54.
  • The Nasdaq Composite Index
    COMP,
    +1.24%

    added 161.05 points, or 1.2%, to finish at 13,138.72, after touching an intraday low at 12,878.72.

On Thursday, the Dow
DJIA,
+1.39%

closed 199.42 points, or 0.6%, higher at 32,619.48, the S&P 500
SPX,
+1.66%

rose 20.38 points to end at 3,909.52, a rise of 0.5%, while the Nasdaq Composite
COMP,
+1.24%

closed at 12,977.68, up 15.79 points for a gain of 0.1%.

For the week, the Dow notched a 1.4% increase, the S&P 500 added 1.6%, and the Nasdaq fell 0.6%.

What drove the market?

Stocks have struggled for direction in recent weeks and have been prone to intraday turbulence. Analysts have largely attributed this latest bout of volatility to month-end and quarter-end rebalancing by large pensions funds.

The impetus for that action is the rise in bond yields on expectations that the economy may stage a more potent recovery and suffer higher inflation in the wake of the $1.9 trillion fiscal stimulus package from the Biden administration.

As a bull market in bonds comes into question, big investors who adhere to traditional stocks-to-bonds portfolio diversification theories of 60% to 40% are feeling compelled to buy more fixed-income assets as yields rise and bond prices fall.

On Friday afternoon, the yield on the 10-year Treasury note yield ended slightly higher
TMUBMUSD10Y,
1.684%
,
after touching a nadir this week around 1.59%, but still below its level last Friday at 1.729%.

Markets seemed to shake off weak reports on consumer spending and income, with that February data showing the biggest decline in spending in 10 months due to harsh winter weather and a temporary respite in government stimulus payments. The new round of stimulus pushed through by Biden will likely lead to a big spending jump, economists believe.

Consumer spending fell 1% in February, compared with an expected drop of 0.8% and the Federal Reserve’s preferred inflation gauge, personal-consumption expenditures, or PCE, rose 0.2% in February, with core inflation up 0.1%, excluding volatile energy and food, matching consensus estimates from economists surveyed by Dow Jones.

Personal income declined 7.1% in February, compared with an expected drop of 7%.

Some strategists took the readings as pointing to a transitory climb in inflation, perhaps supporting Federal Reserve Chairman Jerome Powell’s belief that the central bank won’t lose control of rising prices.

“Softer-than-expected PCE deflator data support the idea that Treasury yields will likely consolidate over the short-term,” wrote Edward Moya, senior market analyst at Oanda, in a daily note.  

Meanwhile, Americans are the most upbeat about the economy and their own financial well-being since the start of the pandemic, a new survey shows, thanks to declining coronavirus cases and more stimulus payments from Washington. The final reading of consumer sentiment in March rose to 84.9 points from 83 earlier in the month, according to a survey produced by the University of Michigan. 

However, a rise in coronavirus cases that has forestalled the business reopening plans for large parts of Europe also has been credited with creating headwinds for bullish investors.

Taken together, those factors have helped create a bumpy rotation out of growth stocks that proved big winners during the pandemic and into those value shares that might perform better in an improving economy.

The S&P 500’s energy sector
XLE,
+2.48%

gained 2% for the week, while the materials sector
XLB,
+2.48%

was up 1.9%, representing the top performing sectors on the week among the broad-market index’s 11. Communication services
XLC,
-1.09%
,
off 1.6%, and utilities
XLU,
+0.33%

were the worst performers.

On Thursday,  President Joe Biden announced a new target for coronavirus vaccinations of 200 million doses during his first 100 days in office, which some analysts credited with Friday’s upbeat trade.

“US stocks want to climb higher given the reopening trade got another boost after President Biden doubled his vaccine goal for his first 100 days,” Moya said.

The Federal Reserve said on Thursday that banks won’t be able to make payouts to shareholders in the form of dividends and buybacks until June 30, as long as the institutions meet regulatory requirements, including pass stress tests. The Fed imposed restrictions on such payments at the onset of the COVID crisis. The S&P 500 financial sector
XLF,
+1.57%

gained 1% on Friday.

In other economic reports, the U.S. trade deficit in goods widened 2.5% to $86.7 billion in February, the Commerce Department said Friday.

Which companies were in focus?
How did other assets fare?
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.2% at 92.72.
  • Oil futures rose as the cargo ship mishap in the Suez Canal persisted, with the U.S. benchmark CL.1 added $2.41, or 4.1%, to settle at $60.97 a barrel on the New York Mercantile Exchange.
  • Gold futures closed higher, but booked a weekly loss. The April contract  GCJ21 added $7.20, or 0.4%, to settle at $1,732.30 an ounce.
  • In Europe, the Stoxx 600 index SXXP closed 0.8% higher, while London’s FTSE 100 UKX ended the session up 0.8%.
  • In Asia, the Shanghai Composite SHCOMP, Hong Kong’s Hang Seng Index HSI and Japan’s Nikkei 225 NIK all closed Friday trade about 1.6% higher.

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