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Dow Jones Industrial Average moves higher as investors digest conflicting economic data

DATE POSTED:March 15, 2019

From Chris Matthews & Mark Decambre: U.S. stocks rose Friday as the major benchmarks aim for their most robust weekly gains in a month, and as investors parse optimistic headlines on U.S.-China trade developments as well as conflicting data on the U.S. economy.

Stocks will also be affected by Friday’s quadruple witching, the simultaneous expiration of stock-index futures and stock-index options, as well as individual stock futures and options.

How did major indexes fare?

The Dow Jones Industrial Average DJIA, +0.60% rose 35 points, or 0.1%, at 25,749, while the S&P 500 index SPX, +0.52% climbed 9 points, or 0.3%, at 2,815. The Nasdaq Composite Index COMP, +0.82% advanced 53 points to 7,683, a gain of 0.7%.

For the week, the Dow is set for a weekly gain of 1.3%, while the S&P 500 is set to rise 2.8%, while the Nasdaq is on pace to rise 3.8% over the past five trading days. The gains would mark the biggest weekly gain since the period ended Feb. 15, according to FactSet data.

What are benchmarks doing?

The Dow has been weighed down this week by Boeing Inc.’s BA, +2.26% struggles related to the grounding of its 737 Max 8 and Max 9. The performance of the broader market, and tech shares in particular, were more robust after data showing that U.S. workers remain in high demand and that consumer confidence is rising.

Investors are also digesting comments from Chinese Premier Li Keqiang, Beijing’s No. 2 leader after President Xi Jinping, who expressed optimism that a trade deal between China and the U.S. can be achieved that suits both parties.

He also denied accusations that the country used its technology to spy on other countries, attempting to lay to rest one of the key issues that stand between the U.S. and China in a trade agreement.

“This is not how China behaves. We did not do that and will not do that in the future,” Li said in translated remarks at the conclusion of the National People’s Congress on Thursday.

He added that the parties may be several weeks away from a tariff agreement, but described China as “very responsible and reasonable.” Separately, U.S. Treasury Secretary Steven Mnuchin, speaking to reporters after his Senate testimony in front of a finance committee said no date had been set for a meeting between Xi and Trump to complete a deal, adding that “there’s still a lot of work to do.”

Bloomberg News a day ago said a meeting that had tentatively been penciled in for the end of March would be pushed back to April.

Trade talks between the two of the globe’s largest economies has been chief among concerns for investors because an heated war between the two have the potential to hurt economies world-wide.

Meanwhile, the Bank of Japan left interest rates unchanged, as expected, while also maintaining purchases of Japanese government bonds.

Separate from its comments on trade, China’s Li underscored weakness in the world’s second-largest economy and promised implementation of ways to boost it, including cutting interest rates and banks’ reserve requirement ratio.

Which data are in focus?

Manufacturing activity in New York state expanded at a slower rate than expected, The New York Fed’s Empire State index fell to a reading of 3.7 in March from 8.8 in the prior month, a near two-year low. Economists had expected a reading of 10, according to a survey by Econoday.

U.S. industrial production rose by 0.1% in February, below the 0.4% increase expected by economists, according to a MarketWatch poll. January’s figure, however, was revised up to show a 0.4% drop, rather than a 0.6% decline as previously estimated.

The report also showed capacity utilization falling slightly to 78.2% in February, from 78.3% in January.

Job openings in the U.S. rose to 7.58 million in January, according to the Labor Department, the third-highest level on record.

Consumer sentiment rose in March, to 97.8 from 93.8 in February, according to a preliminary reading of the University of Michigan consumer sentiment index. The reading was above the 95 level expected by economists polled by MarketWatch.

What are strategists saying?

“The move higher this morning is being driven by [China premier Li Keqiang’s] comments” that the Chinese government was committed to taking stimulus measures needed to prop up the world’s second largest economy, Brent Schutte, chief investment strategist at Northwestern Mutual Asset Management, told MarketWatch.

“You’re seeing smaller cap companies do well, which indicates a risk-on mood on Wall Street,” he added, pointing to strong consumer confidence data as reason to believe that the U.S. economy’s expansion has more room to run.

Pierre Veyret, technical analyst at ActivTrades said “this risk-on sentiment was mainly built on ground of a widespread optimism following President Trump’s recent statement about a ‘very responsible and reasonable China’. The U.S. President also added he will have news on a China trade deal in the next 3-4 weeks and that could lead to an extension of this year’s rally on stocks.”

“Its quadruple options expiration day, which is likely to cause a swelling of volume and volatility,” wrote Peter Cardillo, chief market economist at Spartan Capital Securities.

Which stocks are in focus?

Shares of Facebook IncFB, -2.42% were under pressure after the social media firm said that two senior executives were leaving the company. The stock was down 2.5%. Shares fell 1.9% Thursday, on news that the a grand jury is undertaking a criminal investigation into the company’s data sharing practices.

Amazon IncAMZN, +0.87% stock rose 0.5% early Friday, after KeyBanc Capital raised its rating on the stock to overweight.

Shares of Boeing were 0.9% higher but remain down nearly 11% for the week.

Bioscrip IncBIOS, -30.37% stock fell 30%, after the company announced a dealto merge with privately held Option Care Enterprises Inc.

Shares of Broadcom Inc. rose 10.7% Friday morning, after the chip maker reported fiscal first-quarter earnings Thursday evening that surpassed expectations.

Shares of Ulta Beauty IncULTA, +8.72% rallied 8.1% after the beauty-products retailer reported fiscal fourth quarter results Thursday evening that surpassed expectations, while showing an increase in online sales.

Newell Brands IncNWL, -1.09% shares were in focus after chief executive officer Michael Polk said Thursday evening that he would retire from the company at the end of the second quarter. The stock fell .50.9% Friday.

Shares of Oracle CorpORCL, -0.42% fell 0.7%, following a Thursday-evening report that showed the enterprise-software company beating earnings estimates for the fiscal third quarter that surpassed expectations and an outlook that matched forecasts

How did the major benchmarks fare yesterday?

On Thursday, the Dow rose 7.05 points to 25,709.94, a gain of less than 0.1%. The S&P 500 index slipped 2.44 points to 2,808.48, finishing little changed, and the Nasdaq Composite Index shed 12.50 points, or 0.2%, to 7,630.91.

How are markets trading elsewhere?

In Asia, stocks closed higher Friday, with Japan’s Nikkei 225 NIK, +0.77% China’s Shanghai Composite Index SHCOMP, +1.04% and Hong Kong’s Hang Seng IndexHSI, +0.56% all rising more that 0.5%

European stocks were also on the rise, with the Stoxx Europe 600 SXXP, +0.43%adding 0.6%.

In commodities markets, crude oil prices CLJ9, -0.38% were ticking higher, while the price of gold GCJ9, +0.60%  rose, and the U.S. dollar DXY, -0.21% edged lower against its peers.

The SPDR Dow Jones Industrial Average ETF (DIA) was trading at $257.85 per share on Friday morning, up $0.86 (+0.33%). Year-to-date, DIA has gained 5.10%, versus a 5.74% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 82 ETFs in the Large Cap Value ETFs category.

This article is brought to you courtesy of MarketWatch.

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