U.S. stocks closed higher on Friday as Wall Street clawed back from a sharp decline in the previous session but the market still posted a weekly loss on lingering geopolitical uncertainties.
The Dow Jones Industrial Average
rose 14.31 points to close at 21,858.32. The S&P 500
gained 3.11 points, or 0.1%, to end at 2,441.32, supported by gains in consumer-discretionary, technology and health-care sectors.
The Nasdaq Composite Index
climbed 39.68 points, or 0.6%, to close at 6,256.56.
“From a geopolitical perspective, we understand why the escalation in tensions will have shaken some of the complacency out of investors,” said Eric Wiegand, senior portfolio manager at U.S. Bank Private Client Wealth Management. “And while risks remain elevated from a geopolitical perspective, valuations are not necessarily excessive, though full. But we’re in a low inflationary environment, which can help valuations remain elevated for longer than they would otherwise.”
Friday caps a week dogged by escalating tension between the U.S. and North Korea which culminated with President Donald Trump stating that his earlier threat to unleash “fire and fury” on North Korea “maybe wasn’t tough enough.”
However, an Associated Press report that the U.S. and North Korea have been engaged in back channel talks for several months even as they exchange incendiary threats helped to soothe some of the jitters.
For the week, the Dow is down 1.1%, its biggest one-week drop since November. The S&P shed 1.4%, its worst week since March, while the Nasdaq posted a weekly loss of 1.5%, its worst since June.
Meanwhile, the Russell 2000 index of small-cap stocks finished out the week 2.7% lower, its biggest one-week decline since February 2016.
Apart from geopolitical worries, some technical analysts like Tom McClellan, editor of the McClellan Market Report, blamed seasonality for this week’s retreat given August’s record as a weak month for stocks.
The headlines about North Korea served as a spark to jolt investors out of complacency on the heels of an extended period of calm in the market, said McClellan who shared the following chart in a report.
In the latest economic data, the consumer-price index rose a seasonally adjusted 0.1% in July, its fifth straight month of softness, raising more questions about whether inflation will eventually rise to hit the Federal Reserve’s 2% annual rate target.
Minneapolis Fed President Neel Kashkari, who has advocated for the Fed to halt interest rate hikes until inflation picks up gain, on Friday said his colleagues are telling each other “a ghost story” about higher wage inflation that scared them into raising short-term rates.
Outside the political arena, declines in a pair of technology stocks added to the cautious tone on the day.
Shares of Snapchat parent Snap Inc.
slid 14% a day after the company’s earnings missed forecasts, and the social-messaging company disclosed that average ad prices fell in the second quarter.
shares fell 5.3%, even after the chip maker posted upbeat earnings late Thursday. Some say expectations for its server-chip business were just too high. The stock has more than doubled over the past 12 months, gaining more than 160%.
An editorial in China’s state-run Global Times, published late Thursday local time, added to the pressure on Asian markets. Titled “Reckless game over the Korean Peninsula runs risk of real war,” the editorial suggested China will stay neutral if North Korea strikes first, but will intervene if the U.S. is the first mover.
“If the U.S. and South Korea carry out strikes and try to overthrow the North Korean regime and change the political pattern of the Korean Peninsula, China will prevent them from doing so,” the editorial’s authors said.
Other markets: Oil
earlier fell after the International Energy Agency said oil supply rose for a third month as compliance with an OPEC output deal but have since recovered to settle higher.
–Barbara Kollmeyer contributed to this report.