Stocks Recover From Early Weakness To Close Slightly Higher - U.S. Commentary

(RTTNews) - Stocks showed a substantial recovery over the course of the trading session on Friday after coming under pressure in morning trading. The volatility that was seen on the day extended the choppy trading that was seen throughout the week.

The major averages eventually ended the session slightly higher. The Dow inched up 3.22 points or less than a tenth of a percent to 15,558.83, the Nasdaq rose 7.98 points or 0.2 percent to 3,613.16 and the S&P 500 edged up 1.40 points or 0.1 percent to 1,691.65.

For the week, the Nasdaq advanced by 0.7 percent, while the Dow edged up by 0.1 percent and the S&P 500 was nearly unchanged.

The recovery back toward the unchanged line came as traders looked ahead to the Federal Reserve's monetary announcement next Wednesday.

While the Fed is not widely expected to announce plans to taper its asset purchase program following next week's meeting, traders will be looking for any signals regarding the September meeting.

"Although the recent incoming data have suggested that second-quarter GDP growth could be particularly disappointing, with a sub 1.0% reading possible, we still expect the Fed to begin tapering its monthly asset purchases in September," Capital Economics said in a research note.

The firm added, "Gains in employment have remained more robust and, rightly or wrongly, Fed officials have been very vocal in blaming much of the lingering weakness in economic growth on fiscal consolidation."

Along with the Fed meeting, traders will also be keeping a close eye on the next week's monthly jobs report as well as the initial report on second quarter GDP.

Meanwhile, traders largely shrugged off a report from Thomson Reuters and the University of Michigan showing consumer sentiment at a six-year high in July.

The report showed that the consumer sentiment index for July was upwardly revised to 85.1 from the preliminary reading of 83.9. Economists had expected the index to be upwardly revised to 84.0.

With the upward revision, the index is above the final June reading of 84.1 and at its highest level since July of 2007.

Among individual stocks, shares of Hutchinson Technology (HTCH) plummeted by 30.8 percent after the supplier of suspension assemblies for hard disk drives reported weaker than expected third quarter results.

Online travel agency also fell sharply after reporting second quarter earnings and revenues that came in below analyst estimates. Shares of Expedia tumbled by 27.4 percent on the day.

On the other hand, shares of Activision Blizzard (ATVI) jumped by 15 percent after the video game maker announced an agreement to repurchase most of Vivendi's stake in the company. The company also provided upbeat guidance.

Sector News

While many of the major sectors ended the day showing only modest moves, considerable weakness remained visible in the networking sector. The NYSE Arca Networking Index fell by 1.6 percent after ending the previous session at a two-year closing high.

Ciena (CIEN) helped to lead the networking sector lower, falling by 4.6 percent, while Infinera (INFN) and Juniper Networks (JNPR) also posted notable losses.

Health insurance stocks also ended the day notable lower, resulting in a 1.4 percent drop by the Morgan Stanley Healthcare Payor Index. The pullback by the index came after it reached a record closing high on Thursday.

Meanwhile, gold stocks showed a significant turnaround over the course of the session, with the NYSE Arca Gold Bugs Index rising by 1.3 percent after falling as much as 2.3 percent.

Airline stocks also turned in a strong performance on the day, as reflected by the 1.3 percent gain posted by the NYSE Arca Airline Index. With the gain, the index reached a new six-year intraday high.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. While Japan's Nikkei 225 Index tumbled by 3 percent, Hong Kong's Hang Seng Index edged up by 0.3 percent.

The major European markets also ended the day mixed. The French CAC 40 Index rose by 0.3 percent, while the U.K.'s FTSE 100 Index and the German DAX Index fell by 0.5 percent and 0.7 percent, respectively.

In the bond market, treasuries moved back to the upside after drifting lower over the past few sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 4.6 basis points to 2.561 percent.

Looking Ahead

Next week, the spotlight is likely to be on the outcome of the Fed's monetary policy meeting as well as the employment and GDP reports.

Nonetheless, traders are also likely to keep an eye on reports on pending home sales, consumer confidence, manufacturing activity, and personal income and spending.

On the earnings front, Aetna (AET), Merck (MRK), Pfizer (PFE), Sprint (S), MasterCard (MA), Exxon Mobil (XOM), Kellogg (K), Procter & Gamble (PG) and Sony (SNE) are among the big-name companies scheduled to release their quarterly results next week.