U.S. equities finished mixed on Friday, with the Dow Jones Industrial Average clawing back over the 21,000 level into positive territory in the final minutes of trading, keeping up the recent dynamic of last minute, end-of-day surges on Fridays to ensure sentiment is protected over the weekend. The bulls largely ignored small-cap stocks, however.
In the end, the Dow gained a fraction, the S&P 500 gained 0.1%, the Nasdaq Composite added 0.2% and the Russell 2000 finished lower by 0.1%. Treasury bonds were little changed, the dollar mostly moved lower, gold lost 0.5% and oil gained 1.4%.
Financial stocks outperformed, rising 0.4%. Defensive REITs and consumer staples were the laggards, down 0.4% each. Big Lots, Inc. (NYSE:BIG) gained 3.8% on a fourth-quarter earnings beat, despite soft 0.3% comp-store sales growth (analysts were looking for 1.1% growth).
On the downside, GoPro Inc (NASDAQ:GPRO) fell 4.6% after Reuters reported the company wasn’t engaged with acquisition talks with Hudson’s Bay, as it hadn’t yet secured necessary financing on lingering worries over mall-based retailers. Costco Wholesale Corporation (NASDAQ:COST) fell 4.4% on a quarterly earnings miss on soft revenues and margins.
All eyes were on Federal Reserve Board Chair Janet Yellen’s speech in Chicago, where she endorsed recent hawkish commentary from her colleagues that has pushed March rate hikes odds to 80% — over the 70% threshold that presaged the rate hikes in December 2015 and December 2016.
Yellen said the labor market had essentially hit their full-employment mandate while inflation was moving closer to their 2% goal (as measured by the core PCE metric).
She added that the Fed would likely move rates higher at a faster pace than it did over the past two years. Fed Vice-Chair Stanley Fischer backed Yellen up, saying that there had been almost no economic indicator that has come out badly in the last three months.
Looking ahead to next week, Friday’s employment situation report will set the stage for the following Wednesday’s policy statement from the Federal Reserve. Deutsche Bank analysts are looking for payroll growth of 200,000 on positive seasonality and increased government hiring. Other data to watch includes January factory orders, the trade balance and inventories.
Technically, breadth continues to narrow as shown in the chart above, as the percentage of NYSE stocks above their 50-day moving average moves toward 65%. That’s well off of the peak of nearly 90% set back in January when the Dow was trading below 20,000.