Tech stock rally helps snap los­ing streak

San Francisco Chronicle Late Edition - - BUSINESS REPORT - By Mar­ley Jay

Stocks re­bounded Fri­day, claw­ing back some of the week’s steep losses, but the tur­bu­lent trad­ing of the past 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 past 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

past 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 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 from its lat­est record high, set Sept. 20. Thanks in part to the big gain for tech­nol­ogy com­pa­nies, the Nas­daq com­pos­ite jumped 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 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 Chair­man Jerome Pow­ell helped set off a wave of sell­ing in the bond mar­ket as in­vestors 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 0.1 per­cent to 1,546.68 to wrap up its largest loss in one week since Jan­uary 2016. High-div­i­dend 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.

Ford and Gen­eral Mo­tors con­tin­ued to slump. GM shed 1.6 per­cent to $31.79, its low­est price 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.

In­vestors are also grow­ing more con­cerned that U.S.-China trade ten­sions are im­pair­ing global eco­nomic growth. The In­ter­na­tional Mone­tary Fund cut its fore­cast for global eco­nomic growth this week be­cause of trade ten­sions and in­creased in­ter­est rates.

Sam Sto­vall, chief in­vest­ment strate­gist for CFRA, said he thought stocks fell too far, but there could be more tur­moil ahead for the mar­kets. While stocks had done well in spite of the ris­ing trade ten­sions be­tween China and the U.S., in­vestors seem more wor­ried now.

“Ev­ery­body has been pretty much dis­miss­ing the ef­fect of the trade war on U.S. eq­ui­ties, and now they’re be­gin­ning to think ‘wait a minute, maybe there could be a prob­lem,’ ” he said. “I don’t think the rea­sons for the de­cline have been re­solved.”

Bond prices edged lower. The yield on the 10-year Trea­sury note rose to 3.15 per­cent. At the be­gin­ning of the year it stood at 2.46 per­cent.

U.S. crude oil added 0.5 per­cent to $71.34 a bar­rel in New York. Brent crude, the in­ter­na­tional stan­dard, picked up 0.2 per­cent to $80.43 a bar­rel in Lon­don.

Whole­sale gaso­line rose 0.5 per­cent to $1.94 a gal­lon. Heat­ing oil fell 0.5 per­cent to $2.32 a gal­lon. Nat­u­ral gas lost 1.9 per­cent to $3.16 per 1,000 cu­bic feet.

Asian stocks also re­bounded. Ja­pan’s Nikkei 225 in­dex gained 0.5 per­cent af­ter sink­ing early in the day and fol­low­ing a nearly 4 per­cent loss on Thurs­day.

Euro­pean stocks fin­ished mostly lower.

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