By Karen Langley and Joe Wallace
U.S. stocks ended a volatile week with modest gains as investors parsed economic signals and watched for progress towards additional stimulus from Washington.
Money managers have been grappling with questions about the strength of the economic recovery, the spread of the coronavirus and the status of negotiations over another pandemic relief package. Many expect market volatility to continue at least through the U.S. elections, which are less than three weeks away.
Investors point to reasons beyond the daily headlines to feel optimistic about the future for U.S. equities. Low yields on government bonds have increased the appeal of stocks, and monetary and fiscal stimulus has supported the markets and the economy.
"The market has just been a complete tug of war between the number of cases of Covid increasing, which could obviously lead to a delay in opening the economy, versus the Fed and really the incredible amount of stimulus so far," said Sandy Villere III, portfolio manager at asset manager Villere & Co. "And then the potential vaccine."
Stocks started the week on a high note Monday before recording three days of declines. Upbeat news about retail sales Friday helped major benchmarks end the week in positive territory.
The S&P 500 on Friday edged up 0.47 points, or less than 0.1%, to 3483.81. The broad stock index added 0.2% for the week and is up 7.8% in 2020.
The Dow Jones Industrial Average climbed 112.11 points, or 0.4%, to 28606.31, and finished the week up 0.1%. The tech-heavy Nasdaq Composite slipped 42.32 points, or 0.4%, to 11671.56, up 0.8% for the week.
Investors are scrutinizing fresh evidence about the pace of the economic recovery. Data Friday showed U.S. retail sales rose for a fifth month in a row in September as consumers prepared for additional months working and studying at home. Sales climbed a seasonally adjusted 1.9%, faster than the 0.7% economists were expecting.
"The economy's been holding up very well, considering everything that's gone on," said Neil Hennessy, chief investment officer at Hennessy Funds. "There's a lot that's really going on that's good, and it's just going to get better as we start to open up this economy."
Daily headlines have sent cautionary signals about how quickly that reopening may unfold. Nine states reported record numbers of new coronavirus cases, and the U.S.'s daily tally rose above 60,000 for the first time in more than two months.
"There are some pretty significant concerns that we're going to see a ramp-up in infections in the U.S.," said Ronald Temple, head of U.S. equity at Lazard Asset Management. "I am worried that could be a headwind between now and year-end."
In one sign of the attention to any progress toward a Covid-19 vaccine, the market on Friday rewarded Pfizer after the pharmaceutical giant said it could be ready to apply for emergency-use authorization of its vaccine by late November. Pfizer shares rose $1.40, or 3.8%, to $37.95.
Investors have also focused on developments in talks over another batch of economic stimulus. White House and Democratic negotiators agreed Thursday to include a national coronavirus-testing strategy in relief legislation. Many Republican lawmakers are wary of approving another bill approaching $2 trillion in size.
With signs negotiations may be at an impasse, some investors are looking to after the November elections for the next injection of government support.
"You would hope that after the election you would get some kind of package that would allow the consumer, the distressed corporates, anyone that essentially needs that aid immediately to get it, with a more robust package to follow," said Yousef Abbasi, global market strategist at financial services firm StoneX.
As earnings season continues, analysts are studying quarterly results for signs of how quickly profits will recover. S&P 500 earnings are expected to drop 18% in the third quarter from a year earlier, an improvement from the 25% decline forecast at the end of June.
Among individual stocks, J.B. Hunt Transport Services shares dropped $13.80, or 9.7%, to $128.04 after profits fell short of expectations in the third quarter. Citizens Financial Group shares fell $1.29, or 4.6%, to $26.61 after the bank said its provision for credit losses dragged down earnings.
Overseas Friday, the Stoxx Europe 600 advanced 1.3%. Asian markets were mixed, with China's Shanghai Composite Index ticking up 0.1% and Japan's Nikkei 225 losing 0.4%.
The yield on the 10-year U.S. Treasury ticked up to 0.743%, from 0.730% Thursday. Bond yields rise as prices fall.
Write to Karen Langley at email@example.com and Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
October 16, 2020 17:30 ET (21:30 GMT)Copyright (c) 2020 Dow Jones & Company, Inc.