Markets

U.S. Stocks Pull Back Off Early Highs But Remain Mostly Positive

(RTTNews) - Stocks showed a strong move to the upside at the start of trading on Friday, extending the rally seen over the course of the two previous sessions. The major averages have given back some ground since then, however, with the Nasdaq briefly dipping below the unchanged line.

Currently, the major averages are all in positive territory, although the Nasdaq is up just 10.58 points or 0.1 percent at 7,983.97. The Dow is up 116.46 points or 0.4 percent at 26,478.71 and the S&P 500 is up 10.61 points or 0.4 percent at 2,935.19.

The markets initially benefited from continued optimism the U.S. and China will resume trade talks next month and finally reach an elusive trade deal.

President Donald Trump has repeatedly claimed the Chinese are desperate to reach an agreement, arguing the U.S. tariffs on Chinese goods are doing significant damage to the world's second largest economy.

Trump told Fox News on Thursday that the U.S. and China were scheduled to hold talks at a "different level," although he did not clarify what that means.

Meanwhile, China has signaled that they do not currently intend to retaliate against Trump's latest threat to raise the rate of tariffs on Chinese imports.

Chinese officials have expressed interest in negotiating an end to the escalating trade dispute but argued the U.S. has to create conditions for the two sides to resume talks on the basis of mutual respect.

However, the early buying interest was partly offset by a report from the University of Michigan showing U.S. consumer sentiment deteriorated by even more than initially estimated in the month of August.

The report said the consumer sentiment index for August was downwardly revised to 89.8 from the preliminary reading of 92.1.

The revised reading is down sharply from the final July reading of 98.4, showing the biggest monthly drop since December of 2012.

Surveys of Consumers chief economist Richard Curtin noted the plunge in late 2012 reflected widespread fears of being pushed off the "fiscal cliff" due to then-impending increases in tax rates and decreases in government spending.

"The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one-in-three consumers," Curtin said. "Unlike concerns about the fiscal cliff, which were promptly resolved, Trump's tariff policies have been subject to repeated reversals amid threats of higher future tariffs."

"Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home," he added. "Unlike the repeated tariff reversals, negative trends in consumer sentiment cannot be easily reversed."

The substantial deterioration in consumer sentiment shown by the University of Michigan represents a stark contrast to data from the Conference Board showing only a slight drop in consumer confidence.

The Conference Board released a report on Tuesday showing its consumer confidence index edged down to 135.1 in August after surging up to 135.8 in July. Economists had expected the index to show a much more significant decrease to 130.0.

Computer hardware stocks have shown a significant move to the upside in morning trading, driving the NYSE Arca Computer Hardware Index up by 2.7 percent.

Dell Technologies (DELL) is posting a standout gain after the computer maker reported second quarter results that exceeded expectations.

Considerable strength is also visible among steel stocks, with the NYSE Arca Steel Index extending the rebound seen over the two previous sessions with a 1.5 percent jump.

Semiconductor, chemical, and transportation stocks are also seeing notable strength on the day, while natural gas stocks are pulling back following the spike seen on Thursday.

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday, although China's Shanghai Composite Index bucked the uptrend and dipped by 0.2 percent. Japan's Nikkei 225 Index and South Korea's Kospi surged by 1.2 percent and 1.8 percent, respectively.

Meanwhile, the major European markets have pulled back off their best levels but remain positive. While the German DAX Index is up by 0.9 percent the French CAC 40 Index is up by 0.6 percent and the U.K.'s FTSE 100 Index is up by 0.3 percent.

In the bond market, treasuries have moved slightly higher following the pullback seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by nearly a basis point at 1.508 percent.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.