U.S. stock indexes ended mixed Friday, with the Dow Jones Industrial Average sliding amid growing concerns over rising cases of COVID-19 in the U.S. and Europe, but the technology-laden Nasdaq Composite ended at a record high as bond yields fell.
How are stock benchmarks trading?
The S&P 500 index
slipped 6.58 points, or 0.1%, to close at 4,697.96.
The Nasdaq Composite Index
rose 63.73 points, or 0.4%, to finish at a record 16,057.44.
For the week, the Dow lost 1.4%, while the S&P 500 gained 0.3% and the Nasdaq Composite advanced 1.2%.
On Thursday, the Dow had closed down 60.10 points, or 0.2%, at 35,870.95, the S&P 500 rose 0.3% to end at a record 4,704.54 and the Nasdaq Composite climbed 0.5% to finish at a record 15,993.
What drove the market?
Shares of large technology companies helped deliver a fillip to a stock market otherwise stricken by renewed angst over COVID-19.
“There’s a little bit of malaise around COVID,” said Tony Roth, chief investment officer at Wilmington Trust, in a phone interview Friday. “Europe is having a lot of problems right now,” raising concerns that a similar spike in COVID infections could follow in the U.S.
That has prompted investor interest in the “stay-at-home trade,” including technology stocks, and areas of the market that tend to fare better in a lower interest-rate environment such as growth equities
according to Roth. By contrast, travel-oriented stocks “are not doing so great today in the market,” he said.
Some investors have suggested that bearish news on rising cases of the infectious disease is being used as an opportunity to lighten exposures ahead of next week’s Thanksgiving holiday in the U.S., which is a seasonally thinly-traded period.
An announcement of a 20-day nationwide COVID lockdown by the Austrian government spooked stock markets and sparked buying in government safe-haven bonds on Friday.
COVID developments in Europe are “unsettling markets today” as many investors had probably assumed lockdowns were “behind us,” according to Seema Shah, chief strategist at Principal Global Investors. “It’s a growth concern,” explained Shah, who is based in London, in a phone interview Friday.
Austria’s lockdown will include both those vaccinated and unvaccinated, with movement for the latter having been restricted over the past week. The news from Vienna comes as Germany’s health minister on Friday said that lockdowns couldn’t be ruled out in his country, with record cases this week in Germany and Austria.
“I think we’re seeing a knee-jerk reaction to Austria’s lockdown announcement that’s more a reflection of fear than reality,” said Craig Erlam, senior market analyst at OANDA, in emailed comments. “Other countries like the U.S., U.K. and others will be very reluctant to impose such measures again and will likely adopt a lighter touch, if necessary, and unless unavoidable.”
In the U.S. cases have been rising in the Upper Midwest, with a busy travel season about to begin ahead of the Thanksgiving holiday next week. Also, the daily case count topped 100,000 for a second straight day on Thursday, with the seven-day average rising to a six-week high of 94,669, according to a New York Times Tracker.
The reports of rising infections pushed down oil prices on fears of a fall in demand resulting from COVID lockdowns. West Texas Intermediate crude
slumped 3.7% to settle at $76.10 a barrel.
U.S. markets will close for the Thanksgiving holiday on Thursday, with a shortened session of trading the following day to end the week.
A number of analysts have expressed bullishness about equities, despite a wall of worry, which includes concerns about inflation and the pace of interest rates hikes by the Federal Research.
“The real risk is inflation,” said Roth, “not a lack of economic activity because of COVID.” Roth said he remains “pretty optimistic” about growth in the U.S. partly due to the availability of booster shots for COVID-19 vaccines.
On Friday, Fed Gov. Christopher Waller said the central bank may need to pivot to a faster tapering of its bond purchase program based, in part, on high inflation readings, in a speech to the Center for Financial Stability. Waller described the high inflation seen this year as a “big snowfall that will stay on the ground for a while” rather than a one-inch dusting.
Markets are meanwhile waiting for President Joe Biden to nominate who will head the central bank after Jerome Powell’s term finishes in February. Markets expect Biden will either renominate Powell or Fed Gov. Lael Brainard.
The uncertainty is “very much hanging over markets right now,” said Roth, who worries that Brainard might be “so dovish” as to increase the potential for a policy mistake by waiting too long to hike rates against the backdrop of elevated inflation.
Elsewhere, House Democrats passed Biden’s $1.85 trillion social spending agenda, after plans for a Thursday evening vote were delayed by a nearly four-hour speech by Minority Leader Kevin McCarthy. The bill must now be approved by the Senate.
Which companies were in focus?
Evercore ISI’s C.J. Muse elevated Micron
and Lam Research Corp.
to his firm’s “top picks” list Friday, arguing that both could benefit from the “green shoots” he’s seeing in the memory industry. Shares of Micron rose 7.8%, while those for Lam closed 1.4% higher.
Shares of Foot Locker Inc. FL plunged about 12%, even after the athletic shoe and apparel retailer reported Friday fiscal third-quarter adjusted profit and sales that rose above expectations, while cost of sales fell, and said it was “ready” for the holidays despite the supply chain issues.
Shares of Workday Inc. WDAY fell 4.2% after the software company reported fiscal third-quarter results that surpassed Street estimates, named Barbara Larson as new chief financial officer, and its intention to acquire VNDLY, a cloud-based vendor-management software company.
Nike Inc. NKE said late Thursday that its board of directors has approved a 11% dividend increase to 30.5 cents a share. Its shares climbed 2.1%.
Shares of Sweetgreen Inc., which recently made its debut as a publicly traded company, closed 7.1% higher Friday. The California-based operator of health-driven restaurants had seen its stock surge on Thursday.
How did other assets fare?
The yield on the 10-year Treasury note TMUBMUSD10Y fell Friday about 5 basis points to 1.535%. Yields and debt prices move in opposite directions.
The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, was up 0.5%, trading around its highest level since July 2020.
In Asia, the Shanghai Composite SHCOMP rose 1.1% to gain 0.6% on the week, while the Hang Seng Index HSI declined 1.1% in Hong Kong, notching a 1.1% decline for the week, and China’s CSI 300
rose 1.1% to help it finish about flat for the week, and Japan’s Nikkei 225 NIK rose 0.5% on the session Friday for a 0.5% weekly gain.
–Barbara Kollmeyer contributed to this report.