Dow and S&P 500 drift within reach of records after retail sales report

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U.S. stocks were steady Friday afternoon, after an up trend that has put the Dow and S&P 500 within striking distance of fresh all-time highs as Sino-American trade tensions ease and central banks support risk taking with economic stimulus measures.

How are the major benchmarks performing?

The Dow Jones Industrial Average DJIA, +0.15% rose 56 points, or 0.2%, at 27,236, the S&P 500 SPX, -0.10% fell 2 points, or 0.1%, to 3,008, while the Nasdaq Composite Index COMP, -0.21% retreated 16 points, or 0.2%.

On Thursday, the Dow rose 45.41 points, or 0.2%, to close at 27,182.45, notching a seventh advance and the longest series of gains for the blue-chip index since an eight-session rally ended May 14, 2018, according to FactSet data. Meanwhile, the S&P 500 index added 8.64 points, or 0.3%, to finish at 3,009.57, while the Nasdaq Composite Index advanced 24.79 points, or 0.3%, to end at 8,194.47.

Thursday’s action left the Dow 0.6% from its record at 27,359.16 hit on July 15, while the S&P 500 was 0.5% from its all-time high at 3,025.86 set on July 26. The Nasdaq ended the day 1.6% from its all-time closing high at 8,330.21 also hit on July 26.

What’s driving the market?

Retail sales grew faster than expected in August, up 0.4%, and were up 4.1% year-on-year, the U.S. Commerce Department said on Friday. The rise was driven entirely by purchases of new cars and trucks though, as retail sales ex-autos were flat. Strong demand for big-ticket items like automobiles suggests the U.S. consumer remains confident about his future prospects.

“This morning’s number is above expectations but more importantly it’s the sixth straight month of positive growth for retail sales which is a really encouraging,” wrote Mike Loewengart, vice president of investment strategy at E-Trade Financial in an email. “With holiday spending on the horizon and inflation at bay, we could continue to see momentum in the retail sector. A healthy consumer can help inject some energy into other sectors of the economy.”

“That said, trade tensions are a key focal point and rising tariffs between the US and China could threaten this critical indicator, Loewengart added.

Softening trade tensions between the U.S. and China, with the hope of formal negotiations restarting early next month, and easy-money policies being undertaken by global central banks have all helped to momentarily quell many investors’s fears that a near-term recession will grip the U.S. economy. Beijing made further concessions to the U.S. on international trade on Friday, adding agricultural products like soybeans and pork to the list of imports exempted tariffs.

See: China exempts U.S. agricultural products from tariffs after reports of potential interim trade deal

On Thursday, the European Central Bank on Thursday cut its deposit rate from -0.4% to -0.5%, while announcing it would restart open-ended purchasing of long-term government bonds at a pace of €20 billion a month in an effort to further reduce long-term interest rates.

The Federal Reserve will deliver its monetary policy statement, with further rate cuts widely expected, on Sept. 18.

Thus far, stability, if not outright strength, in the economy has been part of the recipe for rising market prices and bond yields, reflecting a pullback in anxieties. Indeed, gains for equities have come as the 2-year Treasury note TMUBMUSD02Y, +4.82% is on track for its sharpest weekly yield rise since 2011 and the 10-year Treasury TMUBMUSD10Y, +6.81% and the 30-year’s TMUBMUSD30Y, +4.97%  sharpest weekly climb in rates since 2016, according to Dow Jones Market Data.

U.S. consumers grew more confident in September, according to the University of Michigan’s consumer sentiment index, which came in a 92.0 versus the August reading of 89.8.

Which stocks are in focus?

Shares of Broadcom Inc. AVGO, -3.32%  were down Friday after the chip maker announced fiscal third-quarter earnings late Thursday that beat analyst expectations, though its outlook for the annual revenue was below what Wall Street expected.

Apple AAPL, -1.71%  was lower after Goldman Sachs lowered its price target on the grounds that the company’s recently announced TV+ trial period would impact margins. Shares fell Friday.

How are other markets trading?

The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, +6.81%  extended its weekly gain on Friday, adding 9.5 basis points to 1.881% from 1.789% late Thursday. This week could see the biggest U.S. bond-market selloff in several years.

In commodity markets, the price of crude oil CLV19, -0.47%  fell 0.2% to $54.81 a barrel on the New York Mercantile Exchange, while gold prices GCZ19, -0.89%  edged 0.2% higher to about $1,510 an ounce. The U.S. dollar DXY, -0.06%, meanwhile, slumped 0.2% lower relative to a basket of leading rivals, extending its weekly of 0.3%.

In Asia overnight Thursday, Hong Kong’s Hang Seng Index HSI, +0.98% gained 1% and Japan’s Nikkei 225 NIK, +1.05%  rose 1.1%. European shares edged mostly higher Friday, with the Stoxx Europe 600 SXXP, +0.34%  closing 0.3% higher.