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Aug. 30, 2019, 4:37 p.m. EDT

Stocks end mostly higher to trim August decline as trade-war worries ebb

Dell shares rally on positive earnings surprise

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By Chris Matthews and William Watts, MarketWatch

AFP/Getty Images
The U.S.-China trade war has set the tone for stocks in August.

Stocks end mostly higher on Friday, booking their strongest weekly performance since June but still logging a monthly decline after an escalation of the U.S.-China trade war this month.

What are major indexes doing?

The Dow Jones Industrial Average  rose 41.03 points, or 0.2%, to close at 26,403.28, while the S&P 500 index  gained 1.88 points, or 0.1%, to finish at 2,926.46. The Nasdaq Composite Index  headed the other direction, losing 10.51 points to end at 7,962.88, down 0.1%.

The S&P saw a 2.8% rise for the week, while the Dow gained 3% — their strongest weekly advance since the week ended June 7. The Nasdaq rose 2.7% for its biggest weekly rise since the period ended June 21.

The major indexes logged their first losing month since May — and their second losing month of 2019. The S&P 500 saw a 1.8% monthly fall, the Dow declined 1.7% and the Nasdaq gave up 2.6%. U.S. markets will be closed Monday for the Labor Day holiday.

Read: History says the stock market’s volatile August paves the way for more losses in September

What’s driving the market?

Stocks continued to find support Friday after Beijing and Washington this week appeared to adopt less strident tones on trade. China’s foreign ministry on Friday said U.S. and China negotiators were maintaining effective communication, Reuters reported .

Equities spent much of August under pressure as U.S.-China trade tensions escalated, with Washington and Beijing announcing escalating rounds of tariff increases, with some U.S. measures set to take effect on Sunday. Worries over the economic outlook rose, highlighted by a Treasury rally that sank yields and resulted in an inversion of the main measure of the U.S. yield curve, with the 10-year yield falling below the 2-year rate — a phenomenon viewed as an often reliable recession indicator.

For equities, much revolves around the difference between “tensions” and “escalation” on the trade front, said Jeff deGraaf, chairman and head of technical research at Renaissance Macro Research, in a Friday note.

“Trade tensions are fine to us as they provide a wall of worry. Trade escalation is more challenging because it forces a repricing of risk,” he said.

“If this is negotiating gamesmanship in search of the best ‘deal’ for the U.S economy and tax‐payers, we’re all for it...If trade escalation and tweets are just for sport, it will require a more permanent repricing of risk which will be seen in more persistent volatility and lower multiples,” he said.

On the data front, personal income in July rose 0.1% from June, below the 0.3% rise expected by economists polled by MarketWatch. Personal spending rose 0.6%, in line with the consensus. Core PCE inflation, the Fed’s preferred measures, rose 0.2% in July from the month prior, also in line with expectations. Year-over-year, consumer prices rose 1.4%, below the Fed’s target of 2%, potentially supporting calls for the central bank to lower interest rates at its September meeting.

The Federal Reserve’s Chicago-area purchasing managers index reading for August came in at 50.4, versus a 44.4 reading in July. The University of Michigan’s revised index of consumer sentiment printed at 89.8, versus an initial reading of 92.1 and below the 98.4 reading in July.

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