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U.S. stock benchmarks rose modestly early Friday, but stocks are likely to book a second straight weekly loss in a volatile stretch for Wall Street framed by rising bond yields and concerns about the global recovery from the coronavirus pandemic.

How are stock benchmarks performing?
  • The Dow Jones Industrial Average DJIA, +0.53% rose 172 points, or 0.5%, to reach about 32,793.
  • The S&P 500 index SPX, +0.62% was trading 21 points, or 0.6%, higher to 3,932.
  • The Nasdaq Composite Index COMP, +0.63% climbed 62 points, or 0.5%, at around 13,038.

On Thursday, the Dow DJIA, +0.53% closed 199.42 points, or 0.6%, higher at 32,619.48, the S&P 500 SPX, +0.62% rose 20.38 points to end at 3,909.52, a rise of 0.5%, while the Nasdaq Composite COMP, +0.63% closed at 12,977.68, up 15.79 points for a gain of 0.1%.

What’s driving the market?

Stocks have been mostly struggling for direction in recent weeks and analysts have largely attributed this latest bout of volatility to month-end and quarter-end rebalancing by large pensions funds.

The impetus for that action is the rise in bond yields on expectations that the economy may stage a more potent recovery and suffer higher inflation in the wake of the $1.9 trillion fiscal stimulus package from the Biden administration.

As a bull market in bonds comes into question, big investors who adhere to traditional stocks-to-bonds portfolio diversification theories of 60% to 40% are feeling compelled to buy more fixed-income assets as yields rise and bond prices fall.

Early Friday, the yield on the 10-year Treasury note yield TMUBMUSD10Y, 1.662%, after touching a nadir this week around 1.59%, was at around 1.67%, but still below its level last Friday at 1.729%.

Markets seemed to shake off reports on consumer spending and income, with that February data showing the biggest decline in spending in 10 months due to harsh winter weather and a temporary respite in government stimulus payments. The new round of stimulus pushed through by Biden will likely lead to a big spending jump, economists believe.

Consumer spending fell 1%, compared with an expected drop of 0.8% and the Federal Reserve’s preferred inflation gauge, personal-consumption expenditures, or PCE, rose 0.2% in February, with core inflation up 0.1%, excluding volatile energy and food, matching consensus estimates from economists surveyed by Dow Jones.

Personal income declined 7.1% in February, compared with an expected drop of 7%.

Some strategists took the readings as pointing to a transitory climb in inflation, perhaps supporting Federal Reserve Chairman Jerome Powell’s belief that the central bank won’t lose control of rising prices.

“Softer-than-expected PCE deflator data support the idea that Treasury yields will likely consolidate over the short-term,” wrote Edward Moya, senior market analyst at Oanda, in a daily note.  

Meanwhile, Americans are the most upbeat about the economy and their own financial well-being since the start of the pandemic, a new survey shows, thanks to declining coronavirus cases and more stimulus payments from Washington. The final reading of consumer sentiment in March rose to 84.9 points from 83 earlier in the month, according to a survey produced by the University of Michigan. 

However, a rise in coronavirus cases that has forestalled the business reopening plans for large parts of Europe also has been credited with creating headwinds for bullish investors.

Taken together those factors have helped create a bumpy rotation out of growth stocks that proved big winners during the pandemic and into those value shares that might perform better in an improving economy.

The S&P 500’s energy sector XLE, +1.22% is up 1.3% so far this week, while materials XLB, +1.27% are up 0.8%, representing the top performing sectors on the week among the broad-market index’s 11. Communication services XLC, -0.49%, off 0.1% and utilities XLU, -0.70% were the worst performers.

On Thursday,  President Joe Biden announced a new target for coronavirus vaccinations of 200 million doses during his first 100 days in office, which some analysts credited with Friday’s upbeat trade.

“US stocks want to climb higher given the reopening trade got another boost after President Biden doubled his vaccine goal for his first 100 days,” Moya said.

One development that could be worth watching, the Federal Reserve said on Thursday that banks won’t be able to make payouts to shareholders in the form of dividends and buybacks until June 30, as long as the institutions meet regulatory requirements, including pass stress tests. The Fed imposed restrictions on such payments at the onset of the COVID crisis. The S&P 500 financial sector XLF, +0.83% was up 0.8%, however.

In other economic reports, the U.S. trade deficit in goods widened 2.5% to $86.7 billion in February, the Commerce Department said Friday.

Which companies are in focus?
  • WeWork is set to take itself public in a $9 billion merger with a black-cheque company, according to a Wall Street Journal report. The office-sharing company will merge with BowX Acquistion Corp.
  • AMC Entertainment Holdings AMC, -0.74% was up 1.6% on Friday after a strong 21% rise on Thursday for the movie chain.
  • Another so-called meme stock GameStop Corp. GME, +12.65% was rising 15% after a 53% jump on Thursday.
  • Shares of JPMorgan Chase & Co. JPM, +0.99% were up 1.3%, Bank of America‘s shares BAC, +1.63% were up nearly 2% and Citigroup’s stock C, +1.23% was up 1.3% as yields were rising and as investors looked out to the prospect of dividends and buybacks from major money center banks.
How are other assets faring?
  • The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, rose 0.3% at 92.79.
  • Oil futures added 3.5%, as the cargo ship mishap in the Suez Canal persisted, with the U.S. benchmark CL.1 rising $2.09 to trade at $60.67 a barrel on the New York Mercantile Exchange.
  • Gold futures ended lower. The April contract GCJ21 added 10 cents, or less than 0.1%, to reach $1,725.30 an ounce.
  • In Europe, the Stoxx 600 index SXXP rise 0.8%, while London’s FTSE 100 UKX advanced 0.9%.
  • In Asia, the Shanghai Composite SHCOMP, Hong Kong’s Hang Seng Index HSI and Japan’s Nikkei 225 NIK all closed Friday trade about 1.6% higher.