Stocks Close Mostly Higher Following Lackluster Session - U.S. Commentary

(RTTNews) - While buying interest was somewhat subdued, stocks ended Friday's trading mostly higher. The gains on the day partly offset the pullback that was seen over the course of the two previous sessions.

The major averages fluctuated as the day progressed before closing in positive territory. The Dow advanced 69.80 points or 0.5 percent to 15,615.55, the Nasdaq edged up 2.34 points or 0.1 percent to 3,922.04 and the S&P 500 climbed 5.10 points or 0.3 percent to 1,761.64.

For the week, the major averages turned in a mixed performance. The Nasdaq fell by 0.5 percent, while the Dow rose by 0.3 percent and the S&P 500 crept up by 0.1 percent.

The higher close on Wall Street came following the release of a report from the Institute for Supply Management showing that U.S. manufacturing activity unexpectedly expanded at a slightly faster rate in the month of October.

The ISM said its purchasing managers index inched up to 56.4 in October from 56.2 in September, with a reading above 50 indicating an increase in manufacturing activity.

The modest increase came as a surprise to economists, who had expected the index of manufacturing activity to dip to 55.0.

The report points to strength in the U.S. manufacturing sector, although it also added to the renewed uncertainty about the outlook for the Federal Reserve's asset purchase program.

James Knightley, an economist at ING Bank, said, "In general it is a very firm report and will help keep faint thoughts of a December Fed taper alive."

"However, the apparent loss of momentum in the labor market coupled likely soft 3Q GDP number next week could quickly see them fade again," he added.

Positive sentiment was also generated by the release of upbeat data on Chinese manufacturing activity in the month of October.

A report from the China Federation of Logistics and Purchasing and the National Bureau of Statistics showed that the index of activity in the Chinese manufacturing sector rose to 51.4 in October from 51.1 in September.

The Chinese manufacturing index reached its highest level in eighteen months and came in above economist estimates for a reading of 51.2.

Sector News

With the upbeat manufacturing data generating optimism about the outlook for demand, steel stocks showed a strong move to the upside on the day. Reflecting the strength in the sector, the NYSE Arca Steel Index advanced by 1.5 percent.

Cliffs Natural Resources (CLF) and AK Steel (AKS) turned in two of the steel sector's best performances, jumping 6.5 percent and 4.6 percent, respectively.

Transportation, brokerage, and utilities stocks also saw some strength on the day, while most of the other major sectors ended the day showing only modest moves.

On the other hand, gold stocks saw substantial weakness, moving lower along with the price of the precious metal. With gold for December delivery falling $10.50 to $1,313.20 an ounce, the NYSE Arca Gold Bugs Index tumbled by 4 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index fell by 0.9 percent, while Hong Kong's Hang Seng Index edged up by 0.2 percent.

The major European markets also ended the day mixed. While the U.K.'s FTSE 100 Index inched up by 0.1 percent, the French CAC 40 Index fell by 0.6 percent and the German DAX Index dipped by 0.3 percent.

In the bond market, treasuries showed a significant move to the downside on the heels of the upbeat manufacturing data. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 7.8 basis points to 2.62 percent.

Looking Ahead

Next week, traders are likely to keep a close eye on the October jobs report due to be released on Friday, although the data may be distorted by the government shutdown.

Ahead of the jobs report, trading could be impacted by the release of reports on factory orders, service sector activity, and third quarter GDP.

On the earnings front, Kellogg (K), Marathon Oil (MRO), Tenet Healthcare (THC) Office Depot (ODP), Tesla (TSLA), Time Warner (TWX), and Qualcomm (QCOM) are among the companies due to report their quarterly results next week.