Stock Climb, Keeping S&P 500 On Track For A 2nd Weekly Gain

Associated Press
September 06, 2019 - 2:42 pm
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By ALEX VEIGA AP Business Writer

Stocks moved higher on Wall Street in afternoon trading Friday, placing the market on track to notch a second straight weekly gain after a wobbly start to the week.

Health care stocks, technology companies and retailers powered much of the buying. Boston Scientific rose 2.7%, Intel gained 1.6% and Home Depot added 1.1%. Utilities lagged. Communication services stocks also fell, weighed down by Facebook, which lost 1.7% after New York's attorney general announced an antitrust investigation into the company.

The market had a muted reaction to new data showing U.S. employers added fewer than expected jobs in August even as the unemployment rate remained near the lowest level in five decades. The Labor Department's report also showed more people entered the workforce last month, and wages rose more than expected.

Traders are scrutinizing economic data for clues about how the economy is weathering the costly trade war between the U.S. and China. Investors worry that the conflict, and the tariffs that each side has imposed on billions of goods, may be dampening global economic growth and threatening to nudge the United States into a recession.

The jobs report was the latest in a mixed batch of economic data that traders weighed this week. The market sold off on Tuesday after expanded tariffs between Washington and Beijing kicked in and new data indicated that U.S. manufacturing contracted in August for the first time in three years.

Other economic reports have been more positive. Data indicating that companies are still hiring at a solid pace and that productivity rose at a healthy rate last quarter helped drive a strong market rally on Thursday.

Investors have also been encouraged this week by news that envoys from the U.S. and China plan to begin another round of trade talks next month.

"It's been a pretty bullish week and I'm a bit surprised the market has gone as far as it has," said Randy Frederick, vice president of trading & derivatives at Charles Schwab. "I don't think the trade tariffs issue is going to get resolved any time soon, and I don't see that we're a whole lot further along right now than where we were a month ago, when the market was significantly lower than it is."

KEEPING SCORE: The S&P 500 was up 0.2% as of 2:20 p.m. Eastern time.

The Dow Jones Industrial Average rose 101 points, or 0.4%, to 26,829. The Nasdaq rebounded from an early slide, adding 0.1%.

Major indexes in Europe finished higher. Earlier in the day, China's central bank cut a key interest rate, which helped push Asian markets higher.

JOBS REPORT: Employers added 130,000 jobs last month, short of the 160,000 that economists expected and down from July's growth of 159,000. But average hourly earnings rose 3.2% from a year earlier, more than economists expected.

Strong spending by households has been the economy's driving force, even as manufacturers struggle under the weight of increased tariffs. Manufacturing slowed last month for the first time in three years, according to a survey by the Institute for Supply Management.

Investors have grown increasingly worried about whether consumer spending can remain strong enough to keep the economy from tipping into a recession for the first time in a decade.

Economists said Friday's jobs report did little to change their forecasts for the Federal Reserve to cut interest rates at its meeting in two weeks. Treasury yields dipped following the report, and traders remain nearly certain that the Fed will cut short-term rates by a quarter of a percentage point.

It would be the second such cut since August, following nine increases since December 2015, as the central bank tries to cushion the blow on the economy from the U.S.-China trade war. U.S. manufacturing has already slid due to the tensions, and the worry is that businesses could pull back on their spending next.

Lower interest rates make borrowing cheaper and can help encourage economic growth. They also can goose stock prices higher by making them seem more attractive than bonds.

A RARE QUIET DAY: Markets have been turbulent in recent weeks as worries about the trade war have waxed and waned. Between Aug. 1 and Thursday, just over half of all trading days saw the S&P 500 swing by more than 1%.

The latest escalation kicked in Sunday, with the U.S. imposing 15% tariffs on $112 billion of Chinese imports. Washington is planning to hit another $160 billion on Dec. 15, a move that would extend penalties to almost everything the United States buys from China. Beijing responded by imposing duties of 10% and 5% on a range of American imports.

U.S. tariffs of 25% imposed previously on $250 billion of Chinese goods are due to rise to 30% on Oct. 1.

The S&P 500 has remained stuck between roughly 2,840 and 2,940 since the start of August, but it broke above that range this week after U.S. and Chinese officials agreed to hold talks in Washington next month. The S&P 500 is at its highest level in five weeks and just 1.6% below its record set on July 26.

YIELDS: Treasury yields fell following the release of the jobs report. The yield on the 10-year Treasury dipped to 1.55% from 1.56% late Thursday. The two-year yield slipped to 1.52% from 1.53%, and the 30-year yield fell to 2.02% from 2.05%.

A GOOD STRETCH: Lululemon Athletica climbed 7% after the athletic apparel maker handily beat Wall Street's fiscal second quarter profit expectations and raised its profit forecast for the year.

FASHIONABLE RESULTS: Zumiez jumped 9.6% after the clothing retailer handily beat Wall Street's second quarter financial expectations and raised its profit forecast for the year.

REBOOT THIS: Science Applications International slid 8% after the information technology company gave investors disappointing second quarter revenue results.

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AP Business Writer Stan Choe contributed.