Stocks Close Moderately Higher Following Recent Pullback - U.S. Commentary

(RTTNews) - After showing a lack of direction throughout much of the session, stocks moved to the upside in the latter part of the trading day on Friday. The late-day strength partly offset the sharp pullback seen over the two previous sessions.

The major averages ended the day moderately higher, near their highs for the session. The Dow rose 44.50 points or 0.3 percent to 16,491.31, the Nasdaq climbed 21.30 points or 0.5 percent to 4,090.59 and the S&P 500 advanced 7.01 points or 0.4 percent to 1,877.86.

For the week, the major averages turned in a mixed performance. While the tech-heavy Nasdaq rose by 0.5 percent, the Dow fell by 0.6 percent and the S&P 500 edged down by less than a tenth of a percent.

The upward move seen late in the trading session came as some traders looked to pick up stocks at somewhat reduced levels following the steep losses posted on Wednesday and Thursday.

Buying interest remained somewhat subdued, however, as traders continued to express some uncertainty about the outlook for the markets after the Dow and the S&P 500 set record highs earlier in the week.

A mixed batch of U.S. economic data contributed to the choppy trading seen for most of the day, with traders weighing an upbeat housing report against disappointing consumer sentiment data.

Before the start of trading, the Commerce Department released a report showing a much bigger than expected jump in housing starts in the month of April.

The Commerce Department said housing starts surged up 13.2 percent to an annual rate of 1.072 million in April from the revised March estimate of 947,000. Economists had expected housing starts to climb to a rate of 980,000.

Building permits, an indicator of future housing demand, also jumped 8.0 percent to an annual rate of 1.080 million in April from the revised March rate of 1.0 million.

On the other hand, Thomson Reuters and the University of Michigan released a separate report showing an unexpected deterioration in consumer sentiment in the month of May.

The report showed that the consumer sentiment index fell to 81.8 in May from 84.1 in April, while economists expected the index to inch up to a reading of 84.5.

"The main concern behind the small May loss involved dispiriting trends in wages," survey director Richard Curtin said, according to Reuters.

Among individual stocks, shares of J.C. Penney (JCP) moved sharply higher after the department store operator reported a narrower than expected first quarter loss on revenues that came in above estimates.

Luxury retailer Nordstrom (JWN) also showed a strong move to the upside after reporting better than expected first quarter results.

On the other hand, shares of World Wrestling Entertainment (WWE) saw substantial weakness after Benchmark downgraded the stock to Hold from Buy due to concerns about the company's new long-term television agreement with NBCUniversal.

Sector News

Railroad stocks showed a strong move to the upside on the day after coming under pressure along with the broader markets in the two previous sessions. The Dow Jones Railroads Index surged up by 1.8 percent to a new record closing high.

Kansas City Southern (KSU) helped lead the railroad sector higher, jumping by 4.6 percent after Bank of America raised its rating on the company's stock to Buy from Neutral.

Notable strength also emerged among semiconductor stocks, as reflected by the 1.1 percent gain posted by the Philadelphia Semiconductor Index. Applied Materials (AMAT) posted a standout gain after swinging to a profit in the second quarter.

Retail, computer hardware, and tobacco stocks also saw some strength on the day, while most of the other major sectors ended the day showing only modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Friday. Japan's Nikkei 225 Index tumbled by 1.4 percent, while India's Sensex advanced by 0.9 percent.

The major European markets also ended the day mixed. While the German DAX Index dipped by 0.3 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index rose by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries closed modestly lower after rising sharply over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged up by 1.6 basis points to 2.518 percent.

Looking Ahead

The economic calendar for next week is relatively quiet following the slew of data released over the past week, although traders are still likely to keep an eye on reports on new and existing home sales and weekly jobless claims.

The minutes of the latest Federal Reserve meeting are also likely to attract attention along with remarks by several Fed officials.

With earnings season winding down, next week's trading could also be impacted by reaction to quarterly results from big-name companies such as Home Depot (HD), Hewlett-Packard (HPQ), Target (TGT), and Best Buy (BBY).