U.S. equities bounded listlessly around the unchanged line on Friday amid a lack of directional drivers. The Dow Jones Industrial Average lost a fraction, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.5% and the Russell 2000 gained 0.7%. Treasury bonds were little changed, the dollar was down, gold gained 0.6% and oil finished higher for the second consecutive day, rising 0.6%.
Breadth was positive, with 2.1 advancers for every declining issue. Volume was heavy, at 221% of the NYSE’s 30-day average. Energy stocks led the way higher, shaking off recent weakness, to gain 0.8%. Financials were the laggards, down 0.5%.
Steelmakers got a lift from an industry upgrade by Deutsche Bank — in anticipation of supportive trade policies — pushing both AK Steel Holding Corporation (NYSE:AKS) and United States Steel Corporation (NYSE:X) up 5.6%.
Bed Bath & Beyond Inc. (NASDAQ:BBBY) fell 12.2% on weaker-than-expected first-quarter results on an unexpected decline in same-store sales. BlackBerry Ltd (NASDAQ:BBRY) fell 12.1% after revenues missed estimates by 7%.
On the economic front, flash manufacturing PMI fell slightly to the lowest level in nine months. St. Louis Federal Reserve President James Bullard said recent data suggests policymakers can take a “wait and see” approach to the economy before raising rates further.
Conclusion
Looking back on the week, there were three big stories:
Crude Oil Bear Market: West Texas Intermediate fell 4.4% on the week to settle just above $43 a barrel. Down more than 20% from its recent high, this qualifies for a new bear market. Traders remain worried about tepid U.S. gasoline demand, rising U.S. shale output, doubts about the efficacy of OPEC’s output freeze agreement, and still bloated inventories.
Yield Curve Signals Trouble: Long-term U.S. Treasury yields remained under pressure near 2.15%, down from a high of 2.6%+ back in March when the “Trumpflation” trade was still in full effect. With the Fed pushing up short-term rates, the “yield curve” or the difference between short-term and long-term rates moved to its lowest level since December 2007. This reflects bond market concerns about the health of the economy, and the wisdom of the Fed’s ongoing policy tightening, at a time when the economic data is missing estimates on a scale not seen since 2011.
Biotech Rallies Hard: Biotech stocks enjoyed a breakout to fresh highs — ending a multi-year consolidation range — as healthcare reform efforts lost momentum in the Senate and the White House announced possible executive action on drug prices would be delayed. This provided the bulls with something to focus on amid ongoing selling pressure in recent areas of strength such as banks, Big Tech and energy.
Looking ahead, in addition to updates on consumer confidence, personal income, durable goods orders, personal spending and inflation, Fed Board Chair Janet Yellen will be speaking on Tuesday in London on global economic issues. Her comments will be closely watched for any deviation from her commentary earlier this month during the post-announcement press conference.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
