U.S. equities moved higher on Friday as bargain hunters descended, pushing the large-cap averages back into positive territory for the year to date. There was no major catalyst for the move. And trading was quiet. After a busy couple of days focused on the Federal Reserve and the rising odds of a June interest rate hike, traders enjoyed the reprieve.
In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 wafted up 0.6%, the Nasdaq Composite gained 1.2% and the Russell 2000 ended the day 1.6% higher. Treasury bonds were little changed, the dollar was mixed, gold was down 0.2%, and oil declined slightly losing 1% to close at $47.67.
Technology stocks led the way with a 1.2% gain, with Qualcomm, Inc. (NASDAQ:QCOM) up 3.3%. Consumer staples were the laggards down 0.4%. Applied Materials, Inc. (NASDAQ:AMAT) surged 13.8% on an earnings beat and guidance raise. Gap Inc (NYSE:GPS) rose 4.2% after reporting in-line results and focusing on cutting expenses in a difficult retail environment.
Staples stocks were the laggards, falling 0.4%. Ross Stores, Inc. (NASDAQ:ROST) fell 5.5% on in-line earnings by comp-store sales growth that was below the consensus estimate. Deere & Company (NYSE:DE) fell 5.5% despite an earnings beat on better-than-expected equipment sales as investors focused on slowing new equipment pricing and higher credit loss offsets. Profits are down 30% over last year.
There was some focus on the G7 meeting of finance ministers in Japan, with particular attention on any possible comments on Japan’s aggressive management of the yen. A senior U.S. Treasury official said there has been no disorderly moves in the Japanese currency that would justify intervention at the moment. The United States had recently placed Japan — along with China, Korea, Taiwan and Germany — on a new “Monitoring List” as part of its semi-annual currency report.
Watch for more on a possibly more aggressive pushback by the U.S. Treasury on mercantilist currency manipulation tendencies when U.S. Treasury Secretary Jack Lew meets his Japanese counterpart on Saturday.
For now, stocks remain in stasis: mired in a tight three-month trading range capping a three-year trading range that started when the Dow first closed above the 18,000 level just before Christmas 2014.
Breadth continues to deteriorate, however, in a sign of vulnerability as the bulls rely on a narrowing list of stocks to hold the major averages aloft.
As a result, I continue to focus on defensive/short-side positions, such as the June $130 puts on Boeing Co (NYSE:BA) that are up more than 25% for Edge Pro subscribers.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
