By Christine Idzelis and Mark DeCambre
U.S. stock indexes closed higher Friday, but still ended with losses for the week on fears over the spread of the coronavirus delta variant, the imminent tapering of Federal Reserve bond buying, and China’s restrictions on its economy.
Friday’s recovery was broad, with technology stocks among the leaders in the S&P 500 and even energy catching a bid after a withering week for the sector as oil prices slumped.
How did benchmarks trade?
The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.82% rose 225.96 points, or 0.7%, to 35,120.08 .
The S&P 500 /zigman2/quotes/210599714/realtime SPX +1.42% climbed 35.87 points, 0.8%, to 4,441.67.
The Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP +0.83% advanced 172.87 points, or 1.2%, to 14,714.66.
On Thursday, major markets ended mixed, with the S&P 500 and Nasdaq Composite registering small gains, while the small-cap Russell 2000 ended 1.2% lower.
For the week, the S&P 500 slid 0.6%, the Dow declined 1.1% and the Nasdaq Composite lost 0.7% , while the small-cap Russell 2000 index /zigman2/quotes/210598147/delayed RUT +2.74% fell 2.5%.
What drove markets?
Buy the dip for the week was in play on Friday, with investors scooping up shares of information technology /zigman2/quotes/210600213/delayed XX:SP500.45 +0.84% and turning to embattled energy /zigman2/quotes/210600521/delayed XX:SP500.10 +2.85% and financials /zigman2/quotes/210599854/delayed XX:SP500.40 +2.83% , among the worst weekly performers.
“The tidal wave of liquidity is so powerful, so vast, that the buy-the-dips mentality is the dominant force right now,” said David Donabedian, chief investment officer of CIBC Private Wealth Management, in a phone interview Friday. Information technology and communication services are among the areas leading the market in Friday’s trading, he said, similar to last year when COVID-19 was “raging” and “stay-at-home stocks” topped the charts.
The energy sector fell 7.3% this week, while financials were off 2.3%, FactSet data show. Consumer staples /zigman2/quotes/210600216/delayed XX:SP500.30 +0.80% were up 0.4% for the week, healthcare /zigman2/quotes/210600439/delayed XX:SP500.35 +0.40% climbed 1.8%, and utilities /zigman2/quotes/210600278/delayed XX:SP500.55 +1.22% gained 1.8%, which are largely defensive plays. Technology, meanwhile, erased its weekly slide.
“It’s a little difficult to get too excited about equities,” particularly U.S. large-cap, as valuations are “pretty full,” said Michael Reynolds, vice president of investment strategy at wealth-management firm Glenmede, in a phone interview Friday. But Glenmede still has an appetite for risk, he said, targeting areas such as small-cap and international stocks as well as real estate investment trusts.
Researchers at Capital Economics said that delta’s spread continues to weigh on prices, particularly in the commodity complex. “Commodity prices mostly fell this week on the back of a stronger U.S. dollar as well as mounting concerns over the demand outlook,” Capital Economics economists wrote in a Friday note.
All week, concerns about a sharp rise in U.S. COVID cases, hospitalizations and deaths have tamped down bullishness, as the daily average of new U.S. cases over the past seven days rose to 143,827 as of Thursday, up 44% from two weeks ago and the most since Feb. 1, according to a New York Times tracker .
The change in the complexion of the viral spread is causing some Fed members to rethink tapering strategies.
Indeed, Dallas Federal Reserve President Rob Kaplan said he may reconsider his call for the central bank to quickly start to taper its monthly buying of $120 billion in Treasury and mortgage-backed securities if it looks like the spread of the coronavirus delta variant is slowing economic growth.