Stocks Close Nearly Flat Despite Upbeat Consumer Data - U.S. Commentary

(RTTNews) - After ending the previous session slightly higher, stocks showed a lack of direction throughout much of the trading day on Friday. The major averages spent the day bouncing back and forth across the unchanged line before closing nearly flat.

While the Dow edged down 18.05 points or 0.1 percent to 17,634.74 after ending Thursday's trading at a record closing high, the Nasdaq inched up 8.40 points or 0.2 percent to 4,688.54 and the S&P 500 crept up 0.49 points or less than a tenth of a percent to 2,039.82.

Despite the mixed performance on the day, the major averages all moved higher for the week. The Nasdaq surged up by 1.2 percent, while the Dow and the S&P 500 rose by 0.3 percent and 0.4 percent, respectively.

The choppy trading on Wall Street came despite the release of data pointing to solid consumer spending going into the key holiday shopping season.

The Commerce Department released a report before the start of trading showing a slightly bigger than expected increase in retail sales in October.

The report said retail sales rose by 0.3 percent in October, offsetting the 0.3 percent drop seen in September. Economists had expected sales to edge up by 0.2 percent.

Paul Diggle, an economist at Capital Economics, said the retail sales data suggests that fourth quarter consumption growth could be in the region of 2.5 percent annualized.

Additionally, Reuters and the University of Michigan released a separate report showing a sharp jump in consumer sentiment in November.

The report showed that the preliminary reading on the consumer sentiment index for November came in at 89.4 compared to the final October reading of 86.9. Economists had expected the index to show a more modest increase to 87.5.

With the much bigger than expected increase, Reuters said the consumer sentiment index reached its highest level since July of 2007.

The better than expected data may have raised concerns about the outlook for monetary policy and the possibility of higher interest rates.

Traders also seemed reluctant to continue pushing stocks higher after lifting the Dow and the S&P 500 to record highs.

Sector News

Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves.

Gold stocks saw substantial strength, however, with the NYSE Arca Gold Bugs Index soaring by 6.9 percent. The rally came as gold for December delivery jumped $24.10 to $1,185.60 an ounce.

Within the gold sector, Iamgold (IAG) surged up by 21.8 percent after HSBC Securities raised its rating on the company's stock to Overweight from Neutral.

Considerable strength was also visible among computer hardware stocks, as reflected by the 1.7 percent gain posted by the NYSE Arca Computer Hardware Index. With the gain, the index reached a new record closing high.

Networking, internet, and energy stocks also saw some strength on the day, although buying interest remained relatively subdued.

On the other hand, biotechnology showed a significant move the downside, dragging the NYSE Arca Biotechnology Index down by 2.3 percent. BioMarin (BMRN) and Biogen Idec (BIIB) turned in two of the sector's worst performances.

Tobacco and airline stocks also came under pressure over the course of the session, offsetting the strength in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index advanced by 0.6 percent, while Hong Kong's Hang Seng Index rose by 0.3 percent.

The major European markets also saw modest strength on the day. While the German DAX Index inched up by 0.1 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index climbed by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries turned higher over the course of the session after seeing early weakness. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.7 basis points to 2.32 percent.

Looking Ahead

Housing and inflation data is likely to be in focus next week along with the minutes of the latest Federal Reserve meeting, which could shed some light on the outlook for monetary policy.

On the earnings front, retailers Home Depot (HD), Lowe's (LOW), Target (TGT), Best Buy (BBY), Sears (SHLD), and Gap (GPS) are among the companies due to report their quarterly results next week.