Stocks Pull Back Off Best Levels But Close Slightly Higher - U.S. Commentary

(RTTNews) - After failing to sustain an early upward move, stocks gave back some ground over the course of the trading session on Friday. The major averages pulled back well off their best levels of the day but managed to close in positive territory.

While the Dow rose 39.44 points or 0.2 percent to 18,138.38, the Nasdaq crept up 0.82 points or less than a tenth of a percent to 5,214.16 and the S&P 500 inched up 0.43 points or less than a tenth of a percent to 2,132.98.

For the week, the major averages all moved to the downside. The Dow fell by 0.6 percent, the S&P 500 slid by 1 percent and the Nasdaq tumbled by 1.5 percent.

The slightly higher close on Wall Street came on the heels of remarks by Federal Reserve Chair Janet Yellen at a Boston Fed conference.

Yellen suggested the central bank should consider running a "high-pressure economy" to address the lingering effects of the financial crisis.

The Fed chief said it is reasonable to ask whether it might be possible to reverse adverse supply-side effects by temporarily running a "high-pressure economy" with robust aggregate demand and a tight labor market.

Earlier in the day, traders were presented with a slew of U.S. economic data, including a Commerce Department report showing that retail sales rose in line with economist estimates in the month of September.

The Commerce Department said retail sales climbed by 0.6 percent in September after edging down by a revised 0.2 percent in August.

Excluding a jump in auto sales, retail sales still rose by 0.5 percent in September after dipping by 0.2 percent in August. The increase in ex-auto sales also matched estimates.

However, the report also said closely watched core retail sales, which exclude autos, gasoline, building materials and food service, edged up by a smaller than expected 0.1 percent.

A separate report from the Labor Department showed that producer prices increased by slightly more than anticipated in September.

The Labor Department said its producer price index for final demand climbed by 0.3 percent in September after coming in unchanged in August. Economists had expected prices to edge up by 0.2 percent.

Excluding food and energy prices, core producer prices rose by 0.2 percent in September after inching up by 0.1 percent in August. Core prices had been expected to show another 0.1 percent uptick.

ING Senior Economist James Knightley, said, "Overall, the reasonably firm retail sales number and slightly higher inflation data support the idea of a Federal Reserve rate hike in December."

"The only things that can really stop momentum building for such a move would be a market unfriendly election outcome and softness in the two payrolls reports between now and the December FOMC," he added.

Meanwhile, the University of Michigan released a report showing that consumer sentiment unexpectedly fell to its lowest level in a year in October.

Sector News

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

Gold stocks saw substantial weakness, however, with the NYSE Arca Gold Bugs Index slumping by 2.3 percent. The weakness in the sector came as the price of gold for December delivery slipped $2.10 to $1,255.50 an ounce.

Notable weakness also emerged among biotechnology stocks, as reflected by the 1.6 percent drop by the NYSE Arca Biotechnology Index. With the drop, the index fell to a four-month closing low.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

The major European markets also moved to the upside following recent weakness. While the U.K.'s FTSE 100 Index climbed by 0.5 percent, the French CAC 40 Index and the German DAX Index jumped by 1.5 percent and 1.6 percent, respectively.

In the bond market, treasuries pulled back following the rebound that was seen in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 5.6 basis points to a new four-month closing high of 1.794 percent.

Looking Ahead

A slew of big-name companies are scheduled to release their quarterly results next week as the earnings season starts to heat up.

Bank of America (BAC), IBM (IBM), Goldman Sachs (GS), Johnson & Johnson (JNJ), Intel (INTC), American Express (AXP), Verizon (VZ), Microsoft (MSFT), General Electric (GE), and McDonald's (MCD) are among the companies due to report their results next week.

Next week will also see the release of some key economic data, including reports on industrial production, consumer prices, housing starts, and existing home sales.

The Federal Reserve is also due to release its Beige Book, which could shed some additional light on the outlook for monetary policy.