The S&P 500 closed slightly higher on Friday, with trading choppy toward the session’s end and all three of Wall Street’s major averages showed weekly declines as investors worried about interest rates and waited tentatively for upcoming U.S. inflation readings. Canada’s main stock index fell for a fourth straight day, as the threat of higher borrowing pressured interest-rate sensitive stocks during a seasonally-weak period for the market.
Investors worried about rising oil prices and they have been fretting ahead of the U.S. Consumer Price Index (CPI) for August, due on Sept. 13, seeking signals about the Federal Reserve’s future policy decisions on interest rates.
While traders are betting on roughly 93% probability the Fed keeps rates at current levels, after its next meeting ends on Sept. 20., they are pricing in a more divided 53.5% chance for another pause at the November meeting, according to CME FedWatch Tool.
A move higher in U.S. 2-year Treasury yields probably pressured stocks, but investors have been concerned about rising rates since early August, said David Lefkowitz, head of US Equities at UBS Global Wealth Management. “The tone has changed in recent weeks because of the move up in rates. People are questioning whether this is a risk to economic growth. Are higher rates going to lead to some slow down in conjunction with the dwindling of excess consumer savings,” said Lefkowitz, who also cited concerns about high equity valuations.
Oil prices are up so far in September and on track for a fourth straight monthly gain, and this week’s data also fueled inflation fears. This included stronger-than-expected U.S. services activity data and a fall in weekly jobless claims.
“My expectation is that the CPI print could come in higher than expected (with) the price of oil pushing higher,” said Phil Blancato, chief executive officer of Ladenburg Thalmann Asset Management. “We have a problem where ultimately the Fed may be pushed into a corner, and while they might take a pause because of the lag effect, I don’t think they’re done.”
Mixed comments from Fed officials have added to uncertainty. New York Fed President John Williams kept his options open, while Dallas Fed President Lorie Logan said though it “could be appropriate” to keep rates steady at the next meeting, more tightening might be needed.
The Toronto Stock Exchange’s S&P/TSX composite index ended down 57.43 points, or 0.3%, at 20,074.65. For the week, it lost 2.3%.
“We had a week of a general global market pullback and of course it’s not unusual to get that in September,” said Colin Cieszynski, chief market strategist at SIA Wealth Management. “September is the weakest and most volatile month of the year for stocks on a historical basis. ... Interest(-rate) sensitives are struggling and continue to do so.”
Canada’s economy added almost three times the number of jobs expected in August and wage growth accelerated, a sign of underlying economic strength that kept alive prospects of further interest rate hikes by the Bank of Canada.
BoC Governor Tiff Macklem said on Thursday that interest rates may not be high enough to bring inflation down to their intended target, one day after the central bank left its benchmark rate unchanged at a 22-year high of 5%.
The TSX industrials sector fell 0.7% and technology was down 1.4%.
Shares of First Quantum Minerals Ltd fell 2.1% as the union representing workers at the company’s Panama copper mine threatened to go on strike.
The TSX energy sector was down 0.1% but has climbed about 25% since June. The price of oil settled 0.7% higher at $87.51 a barrel, with investors choosing to focus on tighter supply despite broader macroeconomic uncertainty.
Oilfield services firm Precision Drilling Corp was a bright stock. Its shares gained 1.9% after a number of brokerages raised their price targets on the stock.
The Dow Jones Industrial Average rose 75.86 points, or 0.22%, to 34,576.59, the S&P 500 gained 6.35 points, or 0.14%, to 4,457.49 and the Nasdaq Composite added 12.69 points, or 0.09%, to 13,761.53.
For the week, which was shortened by Monday’s Labor Day holiday, the S&P 500 fell 1.3%, while the Nasdaq lost 1.9% with both snapping two weeks of gains. The Dow fell 0.8%.
Apple managed a small 0.3% gain on Friday, though its close of $178.18 was about $2 below its session high as a rally lost steam. The iPhone maker fell sharply in the previous two sessions, pushing down the broader technology sector on news that Beijing had banned central government employees from using iPhones at work.
After losing 2.9% in two sessions, the S&P 500 technology sector closed higher. But energy, up 0.97%, boasted the biggest percentage gains among the 11 S&P 500′s industry sectors as oil prices rose.
Defensive utilities sector had a daily gain of 0.96% while the biggest decliner was real estate, which lost 0.63%.
In individual stocks, Kroger closed up 3% after the retailer beat estimates for quarterly adjusted profit.
Gilead Sciences added 2.8% after BofA Securities upgraded the drugmaker to “buy” from “neutral.”
GameStop finished down 6% after a report that the U.S. Securities and Exchange Commission was investigating the videogame retailer’s chairman, Ryan Cohen.
Advancing issues outnumbered declining ones on the NYSE by a 1.14-to-1 ratio; on Nasdaq, a 1.19-to-1 ratio favored decliners.
The S&P 500 posted 13 new 52-week highs and 17 new lows; the Nasdaq Composite recorded 36 new highs and 229 new lows.
On U.S. exchanges 8.89 billion shares changed hands compared to the 9.96 billion moving average for the last 20 sessions.
Reuters, Globe staff