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US stocks shake off a wobbly start and end mostly higher

Alex Veiga | Hagadone News Network | UPDATED 4 years AGO
by Alex Veiga
| October 25, 2020 12:03 AM

U.S. stock indexes closed mostly higher Friday, though the S&P 500 posted its first weekly loss in four weeks.

The benchmark index eked out a 0.3% gain after another day of wobbly trading. The Dow Jones Industrial Average finished with a small loss. Gains in communication services, health care and other sectors outweighed a decline in technology and energy companies. Treasury yields remained near their highest levels since June.

The indexes bounced between small gains and losses after a sluggish start as investors weighed another batch of corporate results from the summer earnings period. The up-and-down moves have been a familiar pattern recently as traders keep an eye on the ongoing negotiations between Republican and Democractic leaders in Washington over more economic aid for the pandemic-stricken economy.

“It’s generally been a little more of a selling market, and a lot of that has to do with waiting to see whether or not we get a fiscal stimulus package before the election,” said Sal Bruno, chief investment officer at IndexIQ. “The odds of that are getting lower and lower the closer we get to the election.”

The S&P 500 rose 11.90 points to 3,465.39, it's second straight gain. The Dow Jones Industrial Average dropped 28.09 points, or 0.1%, to 28,335.57. The Nasdaq composite, which is heavily weighted with technology stocks, gained 42.28 points, or 0.4%, to 11,548.28. The index had been down 0.6%.

Small company stocks continued to best the rest of the market. The Russell 2000 index rose 10.25 points, or 0.6%, to 1,640.50. The index ended the week with a 0.4% gain, while the major U.S. indexes fell.

Stocks have been mostly pushing higher this month after giving back some of their big gains this year in a sudden September swoon. Before this week, the S&P 500 had notched a weekly gain three weeks in a row. It's now up 3% for the month heading into the final week of October.

Investors are hoping for another round of government aid for businesses and millions of people who have lost their jobs during the coronavirus pandemic. The last round of supplemental aid for unemployed Americans expired at the end of July.

While House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have been negotiating daily this week on a possible aid package. On Thursday, Pelosi said that progress is still being made, but any compromise will likely face stiff resistance from Republicans in the Senate.

Wall Street is worried that if an agreement on more economic aid isn’t reached before the Nov. 3 election, it could leave the matter in limbo should there be a protracted delay in sorting out the outcome of the voting.

“You have political incentives going on right now to try and get something done,” Bruno said. “Once the election has passed, depending on the outcome, maybe some of those political incentives shift. It scrambles the deck quite a bit.”

In their debate late Thursday, President Donald Trump and his Democratic challenger Joe Biden managed a more substantive exchange than during their first raucous clash several weeks ago. There were no major market-moving surprises.

“The final U.S. presidential debate was less chaotic than the first but offered little new information to inform the result for markets,” Stephen Innes of Axi said in a commentary. “Meanwhile, discussion relevant to the post-election economic outlook was limited, particularly from President Trump.”

Uncertainty over whether Uncle Sam will provide more support for the economy was overshadowing solid earnings reports from big companies. While many have reported profits for the summer that took a hit from the coronavirus-caused recession, their results have been mostly not as bad as feared.

Barbie maker Mattel jumped 9.6% after its latest earnings blew past analysts’ forecasts. Capital One Financial gained 1.6% after turning in robust results.

Some companies' results didn't live up to Wall Street's expectations. American Express fell 3.6% and chipmaker Intel sank 10.6%, the biggest decline in the S&P 500, after reporting weakness in its data center business. Intel’s drop helped pull the Dow into the red.

Drugmaker Gilead rose 0.2% after U.S. regulators gave formal approval to its antiviral drug remdesivir to treat patients hospitalized with COVID-19.

Treasury yields dipped but remain near their highest levels since June. The 10-year Treasury yield slipped to 0.84% from 0.87% late Thursday.

The recent pickup in bond yields follows recent encouraging data on residential construction, homebuying and retail sales. It also suggests bond investors are more optimistic that the economy will receive more aid from Washington.

“The fact that (bond yields) have been moving up is not just in support of actual data, but that the data will continue getting better moving forward, which depends to a large extent on getting a stimulus package," Bruno said.

Markets in Europe closed higher, and Asian markets mostly rose.

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AP Business Writer Elaine Kurtenbach contributed.

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