U.S. Stocks Stage Late-Day Recovery Attempt But Close Modestly Lower

Following the downturn seen in morning trading on Friday, stocks showed a notable recovery attempt in the latter part of the session. The major averages climbed well off their worst levels of the day but still closed in the red.

The tech-heavy Nasdaq fell 43.76 points or 0.4 percent to 12,284.74 and the S&P 500 dipped 6.54 points or 0.2 percent to 4,124.08, while the Dow edged down just 8.89 points or less than a tenth of a percent to 33,300.62,

While the Dow ended the day just below the unchanged line, the blue chip index still closed lower for the fifth consecutive session.

For the week, the Dow slumped by 1.1 percent and the S&P 500 fell by 0.3 percent, but the Nasdaq climbed by 0.4 percent.

The early downturn on Wall Street came following the release of a report from the University of Michigan showing U.S. consumer sentiment deteriorated by much more than anticipated in the month of May.

The report said the consumer sentiment index tumbled to 57.7 in May from 63.5 in April, while economists had expected the index to edge down to 63.0.

With the much bigger than expected decrease, the consumer sentiment index slumped to its lowest level since hitting 56.8 last November.

“While current incoming macroeconomic data show no sign of recession, consumers’ worries about the economy escalated in May alongside the proliferation of negative news about the economy, including the debt crisis standoff,” said Surveys of Consumers Director Joanne Hsu.

She added, “Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge.”

Hsu also said year-ahead inflation expectations receded slightly to 4.5 percent in May after spiking to 4.6 percent in April.

Meanwhile, long-run inflation expectations rose to 3.2 percent in May from 3.0 percent in April, reaching their highest reading since 2011.

Worries about the debt ceiling crisis also continued to hang over the markets, with the postponement of a meeting between President Joe Biden and top lawmakers adding to jitters about a potential default.

“The discussion between the U.S. president and Congress around the debt ceiling issue could increasingly become a pain point for the stock market as the potential date for a default approaches,” said DHF Capital CEO Bas Kooijman. “A U.S. default could have a tremendously negative impact on the global economy and on the financial system.”

“In this regard, some banks have started putting in place contingency plans to face a potential default,” he added. “As such, investors could be monitoring the developments around this issue every step of the way in the coming days.”

Sector News

Most of the major sectors ended the day showing only modest moves, contributing to the relatively lackluster close by the broader markets.

Airline and banking stocks saw some weakness on the day, while natural gas stocks moved notably higher along with the price of the commodity.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan’s Nikkei 225 Index advanced by 0.9 percent, while China’s Shanghai Composite Index slumped by 1.1 percent.

Meanwhile, the major European markets all moved to the upside on the day. While the U.K.’s FTSE 100 Index rose by 0.3 percent, the French CAC 40 Index and the German DAX Index both climbed by 0.5 percent.

In the bond market, treasuries gave back ground after moving notably higher over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, increased 6.6 basis points to 3.463 percent.

Looking Ahead

Next week’s trading may be impacted by reaction to the latest U.S. economic data, including reports on retail sales, industrial production, housing starts and existing home sales.

Earnings news may also attract attention, with retail giants Walmart (WMT), Home Depot (HD) and Target (TGT) among the companies due to report their quarterly results next week.

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