Dow Reaches Record Closing High But Nasdaq, S&P 500 Give Back Ground

Stocks turned in a mixed performance during trading on Friday, with the major averages ending the day on opposite sides of the unchanged line. The Dow rose to a new record closing high, but the Nasdaq and the S&P 500 gave back ground.

While the Dow pulled back well off its highs of the session, the blue chip index still ended the day up 137.89 points or 0.3 percent at 42,313.00. The Nasdaq fell 70.70 points or 0.4 percent to 18,119.59 and the S&P 500 edged down 7.20 points or 0.1 percent to 5,738.17.

Despite the mixed performance on the day, the major averages all moved higher for the week, The Nasdaq jumped by 1.0 percent, while the Dow and the S&P 500 both climbed by 0.6 percent.

The mixed performance on Wall Street came following the release of closely watched readings on U.S. consumer price inflation in the month of August.

The Commerce Department said its personal consumption expenditures (PCE) price index inched up by 0.1 percent in August after rising by 0.2 percent in July. The uptick matched expectations.

The report also said the annual rate of growth by the PCE price index slowed to 2.2 percent in August from 2.5 percent in July. Economists had expected the pace of growth to slow to 2.3 percent.

Excluding food and energy prices, the core PCE price index also edged up by 0.1 percent in August after increasing by 0.2 percent in July. Core prices were expected to rise by another 0.2 percent.

Meanwhile, the Commerce Department said the annual rate of growth by the core PCE price index accelerated to 2.7 percent in August from 2.6 percent in July, in line with estimates.

“The August PCE report supports the Fed’s decision to go big on September 18, although the core year-over-year at 2.7% suggests that another round of 50 basis points needs to come under careful scrutiny unless the labor market suggests weakness,” said Quincy Krosby, Chief Global Strategist for LPL Financial.

She added, “Although the Fed cannot declare complete victory on inflation, today’s report – with 2.2% on the year-over- year headline – underscores that overall inflation continues to move decisively in the right direction.”

The readings on inflation, which are said to be preferred by the Federal Reserve, were included in the Commerce Department’s report on personal income and spending.

Sector News

Oil service stocks showed a significant rebound after falling sharply over the two previous sessions, resulting in a 2.6 percent surge by the Philadelphia Oil Service Index. The rally by oil service stocks came amid an increase by the price of crude oil.

Considerable strength was also visible among telecom stocks, as reflected by the 2.0 percent jump by the NYSE Arca North American Telecom Index. The index reached its best closing level in over two years.

Oil producer, natural gas and housing stocks also saw notable strength on the day, while gold stocks moved sharply lower along with the price of the precious metal.

Semiconductor stocks also came under pressure over the course of the session, contributing to the dip by the tech-heavy Nasdaq.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan’s Nikkei 225 Index surged by 2.3 percent, while Hong Kong’s Hang Seng Index spiked by 3.6 percent.

The major European markets also moved to the upside on the day. While the German DAX Index jumped by 1.2 percent, the French CAC 40 Index climbed by 0.6 percent and the U.K.’s FTSE 100 Index rose by 0.4 percent.

In the bond market, treasuries ended the day firmly in positive territory following the inflation data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 4.2 basis points to 3.749 percent.

Looking Ahead

The Labor Department’s monthly jobs report is likely to be in the spotlight next week, while reports on manufacturing and service sector activity may also attract attention.

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