Tech rally helps snap los­ing streak as rough week for Wall Street ends

The Mercury News - - Data - By Mar­ley Jay

NEW YORK — Stocks re­bounded Fri­day, claw­ing back some of the week’s steep losses, but the tur­bu­lent trad­ing of the last few days left no doubt that the rel­a­tive calm the mar­kets en­joyed all sum­mer had been shat­tered.

Ma­jor U.S. in­dexes ended the week down about 4 per­cent, their worst weekly loss in six months. An in­dex mea­sur­ing the per­for­mance of small-com­pany stocks had its worst week since early 2016.

Big tech­nol­ogy and con­sumer-fo­cused com­pa­nies led the re­cov­ery Fri­day. Long­time fa­vorites of many in­vestors, they had plunged in the last few days.

A ma­jor fac­tor cited by mar­ket watch­ers for the pull­back was a sharp in­crease in in­ter­est rates, which can slow the econ­omy and make bonds more at­trac­tive to in­vestors rel­a­tive to stocks.

Ap­ple climbed 3.6 per­cent to $222.11 and Mi­crosoft gained 3.5 per­cent to $109.57. Ama­zon jumped 4 per­cent to $1,788.41. Those are the three most valu­able com­pa­nies in the U.S., and they suf­fered star­tling de­clines the last few days: on Wed­nes­day each took its big­gest loss in more than two years. That made for a dra­matic end to three months of calm on the U.S. mar­ket.

The S&P 500 in­dex rose 38.76 points, or 1.4 per­cent, to 2,767.13 to end a six-day los­ing streak. The bench­mark in­dex tum­bled 4.1 per­cent this week, and it’s down 5.6 per­cent since from its lat­est record high, set Sept. 20. Thanks in part to the big gain for tech­nol­ogy com­pa­nies, the Nas­daq com­pos­ite jumped 167.83 points, or 2.3 per­cent, to 7,496.89.

The Dow Jones In­dus­trial Av­er­age rose as much as 414 points early on, then gave it all up and turned slightly lower. It re­bounded and fin­ished with a gain of 287.16 points, or 1.1 per­cent, at 25,339.99.

The mar­ket’s re­cent skid started last week, when strong eco­nomic data and pos­i­tive com­ments from Fed­eral Re­serve Chair Jerome Pow­ell helped set off a wave of sell­ing in the bond mar­ket as in­vestors they bet that the U.S. econ­omy would keep grow­ing at a healthy pace. That pushed bond prices lower and sent yields up to seven-year highs.

That drove in­ter­est rates sharply higher, which wor­ried stock in­vestors who felt that a big in­crease could sti­fle eco­nomic growth. The big swings in the mar­ket Fri­day sug­gest those fears haven’t gone away. The VIX, a mea­sure­ment of how much volatil­ity in­vestors ex­pect, hasn’t been this high in six months.

“What seems to have driven this is a fear in­ter­est rates were go­ing to rise more quickly be­cause the Fed was be­ing too ag­gres­sive or the econ­omy was go­ing to over­heat,” said David Kelly, chief global strate­gist for JPMor­gan Funds. Kelly said he doesn’t think ei­ther of those fears is jus­ti­fied, as the Fed isn’t rais­ing in­ter­est rates that rapidly and eco­nomic growth hasn’t sped up re­cently.

Small com­pa­nies didn’t fare as well. The Rus­sell 2000 in­dex rose just 1.30 points, or 0.1 per­cent, to 1,546.68 to wrap up its largest loss in one week since Jan­uary 2016. High­div­i­dend stocks like util­i­ties and real es­tate in­vest­ment trusts also rose less than the rest of the mar­ket. They held up rel­a­tively well over the past few days. In­vestors view them as rel­a­tively safe, steady as­sets that look bet­ter when growth is un­cer­tain and the rest of the mar­ket is in tur­moil.

U.S. au­tomak­ers Ford and Gen­eral Mo­tors con­tin­ued to slump. GM shed 1.6 per­cent to $31.79, its low­est in al­most two years. Ford, trad­ing at its low­est in al­most nine years, dipped 1.9 per­cent to $8.64. Both have plunged this year as they deal with slow­ing sales and the Trump ad­min­is­tra­tion’s tar­iffs on steel and alu­minum, which are send­ing their man­u­fac­tur­ing costs higher.

The stocks have fallen fur­ther in re­cent days fol­low­ing re­ports Ford might cut jobs. In late Septem­ber, Ford CEO Jim Hack­ett said the steel and alu­minum du­ties would cost the com­pany $1 bil­lion through 2019.

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