Dow fights for direction as stock market beset by end-of-week turbulence

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By Mark DeCambre and Barbara Kollmeyer

U.S. stocks were tempest tossed midday Friday, with major benchmarks seeing tenuous advances amid up-and-down action on Wall Street, as investors weighed COVID-19 vaccine mandates announced by President Joe Biden to fight the coronavirus delta variant that some worry is slowing the economic recovery.

How are stock-index futures trading?

On Thursday, the Dow industrials fell 151.69 points, or 0.4%, to end at 34,879.38, the S&P 500 index closed down 20.79 points, or 0.5%, to 4,493.28, and the Nasdaq Composite Index finished at 15,248.25, a loss of 38.38 points, or 0.3%.

What’s driving the market?

It’s a topsy-turvy Friday for U.S. stock indexes, with selling in shares of UnitedHealth Group Inc.(UNH) and Apple Inc. (AAPL), capping gains in the Dow industrials, which had been lower earlier in the session.

Earlier declines in the broad-market S&P 500’s consumer staples, energy and financials sectors, gave way to a modest rise that may be coming as investors opt to buy the market’s dips at the end of the week.

Friday’s volatility caps a holiday-shortened week that has seen the Dow and S&P 500 suffer losses for four consecutive days, marking the longest losing skid since June 18.

The week’s trading action comes amid concerns about the impact of the coronavirus delta variant on global economic growth in recent months.

Biden on Thursday announced new vaccine mandates, including a requirement that executive-branch employees as well as federal contractors vaccinate, with no test alternative. He is also discussing a Labor Department rule requiring businesses with 100 or more workers to ensure their employees are vaccinated or show a negative test result weekly or more frequently.

The U.S. is averaging just under 150,000 new cases a day, with only 53% of the population fully vaccinated, which is well behind many countries in Europe and Canada, according to a New York Times tracker.

While the focus is on rising COVID cases, markets are also watching the Federal Reserve for an indication of when it might taper its bond-buying purchases. Investors will have to wait until Sept. 21-22 for the next Federal Open Market Committee meeting. However, there is already speculation that the Fed will set the stage at its next meeting for an announcement of a plan to taper its monthly asset purchases at its November gathering, according to The Wall Street Journal.

Read:Fed’s Kaplan, Rosengren to sell stocks to avoid perception of conflict of interest

Meanwhile, a report on wholesale inflation came in hotter than expected. The U.S. producer-price index rose 0.7% in August, the Labor Department said Friday, down from a 1% jump in July but up from average forecast of economists polled by WSJ for a 0.6% rise.

“The extent that we see flow through to the consumer remains to be seen, but this is another shot to the transitory narrative that has been the dominant reason to continue emergency fed policy,” wrote Sean Bandazian, investment analyst for Cornerstone Wealth, in emailed remarks on Friday.

A number of Fed officials have described inflation as short-lived and economists are starting to talk about prices peaking in the wholesale sector. However, producers are still struggling with shortages, bottlenecks and transportation woes.

“These releases frequently indicate that higher prices will remain sticky for a while,” the Cornerstone analyst said.

Joe LaVorgna, chief economist of the Americas at Natixis, also noted that inflation has the potential to be a much longer-term concern that has negative implications for financial markets.

“With the economy already having recouped the entire amount of its pandemic-related losses and the labor market experiencing record demand for workers, the potential for a permanent regime shift in inflation is high,” the economist wrote in a Friday research note along with colleague Troy Ludtka.

Meanwhile, the European Central Bank said on Thursday that it would conduct asset purchases under its pandemic emergency purchase program, or PEPP, at a “moderately slower pace” after accelerating purchases in recent quarters.

“We expect major central banks to remain supportive of growth, keeping rates lower for longer. This is positive for equity markets, particularly cyclical and value areas of the market,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, to clients in a note on Friday.

Sentiment also appeared to be getting a lift from geopolitics, with broad gains across Asia after a phone call between Biden and his Chinese counterpart Xi Jinping. “The call lasted 90 minutes with both sides putting their own spin on the call, although the civilized tone seemed to serve as a general boost to risk sentiment overnight,” said Saxo Bank’s chief investment officer, Steen Jakobsen, in a note to clients.

Which companies are in focus?

How are other assets trading?

-Mark DeCambre


(END) Dow Jones Newswires

09-10-21 1339ET

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