U.S. stocks finish sharply higher Friday, but S&P 500 still books biggest weekly drop since February

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By Christine Idzelis and Mark DeCambre

S&P 500, Nasdaq record worst weeks since February

U.S. stocks ended sharply higher Friday after a batch of mixed economic data, kicking off October with gains although major indexes posted losses for the week.

Initial optimism on Wall Street was pegged partly to news that Merck & Co. (MRK) and partner Ridgeback Biotherapeutics, said their oral antiviral treatment for COVID-19 reduced the risk of hospitalization or death by 50% for patients with mild or moderate cases.

How did stock-market indexes trade?

For September, the Dow lost 4.3% and the S&P 500 fell 4.8% to snap a seven-month winning streak. The Nasdaq Composite was off 5.3%, its worst September in a decade. For the third quarter, the Dow fell 1.9%, the S&P 500 was up 0.2% and the Nasdaq Composite rose 0.4%.

This week, the Dow fell 1.4%, its biggest weekly decline since the week ending September 10, according to Dow Jones Market Data. The S&P 500 lost 2.2% for the week, its largest percentage drop since the week ending February 26. The Nasdaq saw a 3.2% weekly drop, also its biggest decline since the week ended February 26.

What drove the market?

Equity markets were choppy Friday, moving higher in the afternoon after relinquishing modest opening gains, as investors assessed a batch of mixed data on the U.S. economy.

U.S. personal spending and incomes provided further evidence that the cost of goods and services are rising, with the rate of U.S. inflation at a 30-year high, and all signs pointing to price pressures snaking into next year.

“People will tell you that they’re gloomy, but they’re not acting like they’re gloomy,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab, in a phone interview Friday. “People are still spending.”

The personal consumption expenditure price index climbed 0.4% in August, the government said Friday, marking the sixth straight increase. The rate of inflation in the 12 months ended in August edged up to 4.3% from 4.2%–the highest rate since 1991, when George H.W. Bush was president.

The Institute for Supply Management manufacturing index for September also rose to 61.1 from 59.9 in the prior month. A reading of 50 or better indicates improving conditions.

“That’s a really good print,” said Megan Greene, global chief economist at Kroll Institute, in a phone interview Friday. “I think most of us were expecting it to slow down a bit.”

Ahead of the morning’s ISM data, a report on Merck’s experimental drug helped bulls make a case for higher stocks, but concerns over the U.S. debt-ceiling debate in Washington, D.C. may act as a damper as a deadline to lift it looms.

“Every day we go by where they don’t have a deal, that’s just one more reason for the market to get volatile and people to get nervous,” said Frederick. “I just hope they get this resolved sooner rather than later.”

Jittery investors dumped stocks Thursday, taking little comfort from news of a short-term spending bill to avert a government shutdown while debt-limit wrangling was set to continue. Speaker Nancy Pelosi late Thursday called off a planned vote in the U.S. House of Representatives on a $1 trillion bipartisan infrastructure bill, as Democratic lawmakers failed to agree on other linked spending proposals.

Apart from a rough September and third quarter, the S&P 500 index remains up 16% this year, according to FactSet data.

“As we head into the final quarter of 2021 the gains year to date are still pretty decent, which raises the question, how much more is left in the tank, and whether this October will live up to the reputation of Octobers past, and deliver a huge curveball, as well as giving investors an anxiety attack,” said Michael Hewson, chief market analyst at CMC Markets U.K.

“There’s certainly plenty to be concerned about from surging energy prices, supply-chain disruptions, and concerns about more persistent inflation,” he said in a note to clients.

Energy prices have been soaring, including in Europe, with shortages on the continent as well as in Asia, where China has been hit by power cuts and outages. Traders are betting on higher crude demand after a report Thursday said China has ordered state-owned energy companies to secure winter supplies at all costs.

Which companies were in focus?

How did other assets trade?

–Barbara Kollmeyer contributed to this report.

-Christine Idzelis

 

(END) Dow Jones Newswires

10-01-21 1707ET

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