Shares are flat on Friday, S&P 500 faces per week’s loss
Stocks were mostly flat on Friday, reversing early gains, and it was a mixed week even after Treasury Secretary Janet Yellen said a big stimulus package was needed for a full economic recovery.
The Dow Jones Industrial Average rose 40 points, up about 0.13% after rising more than 150 points earlier in the day. The S&P 500 was down 0.1% while the Nasdaq Composite was down less than 0.1%.
Although major indices traded higher for most of the morning, a combination of rising interest rates and profit-taking at some of the largest tech companies in the market appeared to dampen profits after noon.
During the week, the S&P 500 was down 0.5% while the Nasdaq Composite was down 1.5%. The Dow Jones Industrial Average fared better with a modest plus of 0.3%.
Cyclical stocks outperformed the broader market, with the industrial, materials and financial sectors rising 1.6%, 1.3% and 1%, respectively. Utility and consumer staples stocks were among the biggest laggards.
Small-cap stocks, which also tend to track the ebb and flow of the economy as a whole, were well on their way to solid gains on Friday at the expense of some of the biggest market players. The Russell 2000 last rose 2% while Facebook, Amazon, Netflix and Microsoft fell.
Apple is down 4.3% from the week.
Not all technologies underperformed as chipmakers proved robust. Applied Materials, which is used to make the devices used to manufacture semiconductors, issued a better-than-expected forecast for the second quarter after Bell Thursday. The stock gained 6.6% on Friday.
The strength of economically sensitive stocks came after Yellen told CNBC on Thursday after the bell that further stimulus was needed, although some economic data suggests a rebound is already underway. She added that a $ 1.9 trillion economic agreement could help the US get back to full employment in a year.
“We think it’s very important to have a big package [that] addresses the pain this has caused – 15 million Americans are behind on their rent, 24 million adults and 12 million children who don’t have enough to eat, small businesses fail, “said Yellen Sara Eisen of CNBC during a” Closing Bell “interviews.
“I think the price of too little is much higher than the price of something big. We believe the benefits will far outweigh the costs in the long run,” she added.
Even so, the record stock market rally this week has stalled a bit as fears of rising interest rates and higher inflation have crept in. The S&P 500 fell for a third straight day on Thursday after unemployment claims turned worse than expected, with weak leadership from Walmart.
Some investors said pessimism about a rate hike and the potential for inflation had kept Wall Street in check for the past few sessions. The 10-year government bond yield rose to its highest level in nearly a year this week and rose another 7 basis points to 1.36% on Friday.
However, Yellen said she doesn’t think inflation should be the top concern.
“Inflation has been very low for over a decade, and you know that is a risk, but it is a risk that the Federal Reserve and others have tools to deal with,” she said. “The greater risk is scaring people as this pandemic is permanently affecting their lives and livelihoods for life.”
Many on Wall Street agree with Yellen that a huge incentive is needed and that a trillion dollar package, along with a smooth economic reopening this year, will keep the market rally continuing.
“Much of our deliberations for additional profit from here depends on an ongoing belief that the key drivers that helped bring the market up to date remain intact,” said Scott Wren, Wells Fargo’s leading global market strategist in a note. One of the drivers is “an additional incentive from Congress that will help bridge the gap between now and the spread of vaccines”.
The House of Representatives will attempt to pass a $ 1.9 trillion coronavirus relief plan before the end of February, spokeswoman Nancy Pelosi said Thursday. Democratic Congress leaders could try to pass a package without a Republican vote.
After a temporary retreat in December, homebuyers returned to the market in January despite the record low. Existing home sales rose 0.6% in January versus December, according to the National Association of Realtors.
Sales ended the month at a seasonally adjusted annual rate of 6.69 million units. This number is 23.7% higher than January 2020 and the second fastest sales rate since April 2006.
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