US close: Wall Streets caps off very strong week despite narrowing yield spread

By Sharecast News

Sharecast News | 13 May, 2018

23:30 26/04/24

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Wall Street capped off a strong week with further gains on Friday, with the Dow rising to its best mark in roughly eight weeks.

By the closing bell, the Dow Jones Industrial Average was higher by 0.37% or 91.64 points at 24,831.17, alongside a 0.17% or 4.65 point gain on the S&P 500 to 2,727.72, although the Nasdaq Composite dipped 0.33% or 13.69 points to finish at 4,130.17.

Pacing gains by sectors were: Mobile Telecomunications (2.63%), Biotechnology (2.01%), Telecommunications (1.99%) and Home Improvement Retailers (1.92%).

To take note, the yield spread between two and 10-year Treasury notes fell to 43 basis points - its lowest in approximately a decade.

Before the start of the session, Oanda analyst Craig Erlam had pointed out how US equity markets were on course for a perfect week - five consecutive daily gains - which when you consider the drop-off in sentiment and markets since the end of January was quite encouraging.

"If the Dow can find a way above 25,000 in the process, it could signal a shift in sentiment in equity markets which have looked extremely vulnerable to another sharp decline. Of course, this may depend on whether the gains have been primarily built on the rally in energy stocks in response to the withdrawal of the US from the Iran nuclear deal, or an actual belief that the market sell-off has run its course," Erlam said.

"It's interesting though that a very good earnings season has so far not been enough to trigger such a move which makes me question whether the recent move has legs."

For the Dow, Friday marked its seventh consecutive close higher and for the week it added 2.3%, followed by a jump of 2.4% on the S&P 500 and of 2.7% for the Nasdaq Composite.

On the data front, US import prices rose less than expected in April due to a bounce back in petroleum products prices was offset by declining food prices, indicating that inflation pressures were increasing moderately.

Import prices rose 0.3% last month (consensus: 0.5%), said The Labor Department. Furthermore, data for March was revised down to show a 0.2% decrease, as opposed to the previously reported flat figure.

The Labor Department also revealed that export prices had moved ahead 0.6% in April a month after having gained 0.3% as prices for agricultural products fell 1.2% last month, the first drop since December 2017, as a result of lower prices for soybeans, nuts and wheat.

In terms of the year-on-year rate of change, import prices printed at up by 3.3% (consensus: 3.9%).

Elsewhere, the University of Michigan consumer sentiment index was unchanged at 98.8 in the early May reading, just shy of economists forecasts for a reading of 99.0.

On the corporate front, chip maker Nvidia was down 2.15% despite better-than-expected quarterly earnings.

Nevertheless, its shares were trading just off their record highs.

For its first quarter, Nvidia boasted sales of $3.21bn, up from the $1.94bn seen a year ago (consensus: $2.89bn). Adjusted earnings per share meanwhile came in at $2.05 (consensus: $1.46).

The Trade Desk shot up 43.39% after stronger-than-expected quarterly earnings, whereas cloud storage company Dropbox lost 2.25% despite beating analysts' forecasts for quarterly earnings and sales.

Dow Jones - Risers

Verizon Communications Inc. (VZ) $48.62 4.83%
Unitedhealth Group Inc. (UNH) $238.28 3.96%
Johnson & Johnson (JNJ) $127.26 3.02%
Merck & Co. Inc. (MRK) $59.69 3.00%
Exxon Mobil Corp. (XOM) $81.27 1.69%
Home Depot Inc. (HD) $190.33 1.68%
Procter & Gamble Co. (PG) $73.37 1.38%
Travelers Company Inc. (TRV) $131.25 1.16%
United Technologies Corp. (UTX) $124.48 1.11%
Pfizer Inc. (PFE) $35.52 0.94%