Stocks Close Higher For Second Consecutive Session - U.S. Commentary

(RTTNews) - Extending the choppy trading seen in the previous session, stocks fluctuated over the course of the trading day on Friday but managed to close higher for the second straight day. The gains on the day further offset the pullback seen on Wednesday.

The major averages moved to the upside going into the close, ending the session at their best levels of the day. The Dow advanced 102.69 points or 0.6 percent to 16,433.09, the Nasdaq climbed 26.09 points or 0.5 percent to 4,822.34 and the S&P 500 rose 8.76 points or 0.5 percent to 1,961.05.

With the upward move seen over the past two days, the major averages moved notably higher for the week. The Nasdaq surged up by 3 percent, while the Dow and the S&P 500 both jumped by 2.1 percent.

The lackluster performance seen for much of the session came as traders looked ahead to the Federal Reserve's monetary policy meeting scheduled for next week.

The Fed is due to announce its latest policy decision next Thursday, but analysts are still split regarding whether the central bank will announce an increase in interest rates.

While upbeat economic data points to the first rate hike in nearly a decade, the recent market volatility and concerns about developing economies may keep the Fed on hold.

Ahead of the meeting, traders are likely to keep an eye on key reports on retail sales, industrial production, consumer prices, and housing starts, which could impact the Fed's decision.

The Labor Department released a report this morning showing that producer prices came in flat in August, as a drop in energy prices was offset by a continued increase in service prices.

The producer price index for final demand was unchanged in August after rising by 0.2 percent in July. Economists had expected the index to edge down by 0.1 percent.

Excluding food and energy prices, the core producer price index rose by 0.3 percent in August, matching the increase seen in the previous month. Core prices had been expected to tick up by 0.1 percent.

Meanwhile, the University of Michigan also released a report showing a sharp drop in consumer sentiment in early September.

The report said the consumer sentiment index tumbled to 85.7 in September from the final August reading of 91.9. Economists had expected the index to show a much more modest decrease to 91.0.

The much steeper than expected drop by the index likely reflects concerns about the substantial volatility seen on Wall Street in recent weeks.

Sector News

Commercial real estate stocks showed a strong move to the upside over the course of the trading session, driving the Morgan Stanley REIT Index up by 1.8 percent. With the gain, the index climbed further off the eleven-month closing low set last Friday.

Urstadt Biddle Properties (UBA), DDR Corp. (DDR), and Mack-Cali Realty (CLI) turned in some of the real estate sector's best performances.

Significant strength also emerged among biotechnology stocks, as reflected by the 1.6 percent gain posted by the NYSE Arca Biotechnology Index. Seattle Genetics (SGEN) and Nektar Therapeutics (NKTR) posted standout gains.

Electronic storage and housing stocks also saw notable strength on the day, contributing to the higher close by the broader markets.

On the other hand, considerable weakness remained visible among oil service stocks, which moved lower along with the price of crude oil. With crude for October delivery falling $1.29 to $44.63 a barrel, the Philadelphia Oil Service Index dropped by 2.4 percent.

Networking and natural gas stocks also moved to the downside, partly offsetting the strength seen in the aforementioned sectors.

Other Markets

In overseas trading, most stock markets across the Asia-Pacific region showed only modest moves during trading on Friday. Japan's Nikkei 225 Index edged down by 0.2 percent, while China's Shanghai Composite Index crept up by 0.1 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the German DAX Index dropped by 0.9 percent and the French CAC 40 Index slumped by 1 percent.

In the bond market, treasuries moved higher on the heels of the disappointing consumer sentiment data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.9 basis points to 2.183 percent.

Looking Ahead

The Fed's monetary policy announcement is likely to be the highlight of next week, although traders are also likely to keep a close eye on the slew of U.S. economic data.