NEW YORK (MarketWatch) — U.S. stocks stepped higher Friday but were on pace to close mostly lower for the week, as investors stayed sensitive to news about the government shutdown.
The main indexes erased some of their gains for the session after testy comments from House Speak John Boehner, but then recovered and hit fresh intraday highs.
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Facebook, Potbelly are stocks to watch Polya Lesova takes a look at which stocks traders will be watching during market action, including Facebook, Union Pacific Railroad, and Potbelly. Photo: AP.
The S&P 500 index (SPX) was last up 10 points, or 0.6%, to 1,689. Materials and health care performed best among S&P 500 sectors, while telecom fared worst, losing ground.
The Dow Jones Industrial Average (DJIA) rose 71 points, or 0.5%, to 15,067. Visa Inc. (V) showed the largest gain among blue chips with its 1% advance, while Verizon Communications Inc. (VZ) and Merck & Co. (MRK) were the biggest losers as they each fell 0.6%.
The Nasdaq Composite (COMP) tacked on 32 points, or 0.9%, to 3,807.
For the week, the S&P 500 is on pace for a weekly loss of 0.2%, and the Dow is set to lose 1.2% for the week. But the tech-heavy Nasdaq is on track for a weekly gain of 0.7%, helped by Microsoft (MSFT) advancing 2.1% for the week.
At a news conference on Friday, Boehner called for Democrats to negotiate and criticized a Democratic aide who said that the party is "winning." The latest news on the shutdown also includes senior Republicans shifting away from their drive to undercut the Affordable Care Act and instead focusing on a broader budget deal that would include raising the debt ceiling.
President Barack Obama late Thursday canceled a weeklong trip to Asia given the financial uncertainty at home. Separately, media reports said that Boehner has indicated that he is willing to pass an increase in the debt limit. The debt-ceiling issue is widely seen as more significant than the shutdown, but the two issues are also now viewed as blending together.
The Treasury Department has said the debt ceiling must be raised by Oct. 17.
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Equity strategists at Bank of America Merrill Lynch suggested Friday that the recent selling is temporary. "In our view, the year-end risk is to the upside, not the downside, and the current brief de-risk on Wall Street will likely be followed by a truce in Washington and renewed stock-market strength," they wrote in a note.
The strategists also said: "For asset allocators to now reduce equities in favor of bonds, D.C.'s dysfunction needs to be exacerbated by unambiguously weak economic data. We think that's unlikely."
Doug Coté, chief market strategist at ING U.S. Investment Management, said he expects the Washington battles to remain unresolved until the Oct. 17 deadline, saying a last-minute deal has become normal procedure for politicians in recent years. But Coté remains bullish on stocks.
"I think this is all temporary," he told MarketWatch on Friday. He said fundamentals are "the ultimate driver of the markets," and they've been improving not only in the U.S. but around the world.
Stock-market bulls are bending but not breaking this week, according to a Friday note from Jonathan Krinsky, chief technical market analyst at Miller Tabak. He pointed out the S&P 500 on Thursday closed below its 50-day moving average, an important chart level, for the first time since Sept. 6. But he said the benchmark index is staying above a key rising trend line.
On Friday, investors are taking in a flurry of Fed speeches, including from Richmond Fed President Jeffrey Lacker and Minneapolis Fed President Narayana Kocherlakota. Federal Reserve Governor Jeremy Stein called for more regulation in the repo market at a New York Fed conference on Friday. On Thursday, Atlanta Fed President Dennis Lockhart said a prolonged government shutdown would make it unlikely for the Fed to scale back its bond buys in October.
Due to the shutdown, the government's monthly jobs report didn't come out as usual on Friday, taking away a critical bit of economic data from traders and Fed policy makers seeking to make a data-dependent decision on when to taper their bond-buying program.
In corporate news, Facebook (FB) rose 3% after announcing plans for ads on its Instagram service and as rival social network Twitter disclosed financial details related to its IPO.
In other IPO news, shares in sandwich chain Potbelly Corp. (PBPB) surged in their debut on the Nasdaq on Friday.
The dollar rose and oil prices also advanced. Gold prices declined, but industrial metals were up.
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