Stocks Close Mostly Higher But Well Off Best Levels - U.S. Commentary

(RTTNews) - While stocks moved sharply higher at the start of trading on Friday, buying interest waned not long after the open. The major averages subsequently pulled back well off their highs for the session but managed to close in positive territory.

The gains on the day lifted the Dow and the S&P 500 to new record closing highs. The Dow climbed 91.06 points or 0.5 percent to 17,810.06, the Nasdaq edged up 11.10 points or 0.2 percent to 4,712.97 and the S&P 500 advanced 10.75 points or 0.5 percent to 2,063.50.

For the week, the Nasdaq rose by 0.5 percent, while the Dow and the S&P 500 jumped by 1 percent and 1.2 percent, respectively.

The initial strength on Wall Street was partly due to news that China's central bank cut its benchmark interest rates for the first time since July of 2012.

The People's Bank of China said the one-year lending rate was reduced by 0.4 percentage points to 5.6 percent, while the one-year deposit rate was lowered by 0.25 percentage points to 2.75 percent.

The move was seen as part of an effort by the Chinese government to combat recent signs of sluggishness in the world's second largest economy.

Peter Boockvar, managing director at the Lindsey Group, said, "The cost of credit in China is now modestly lower but we'll have to see whether it helps the supply of it and demand for it."

"Big state companies have easy access to credit and it's why Chinese authorities have taken steps to help small and medium sized businesses," he added.

Positive sentiment was also generated by comments from European Central Bank President Mario Draghi indicating that the bank may broaden its asset purchases in an effort to boost inflation.

"We will do what we must to raise inflation and inflation expectations as fast as possible, as our price stability mandate requires of us," Draghi said.

He added, "If on its current trajectory our policy is not effective enough to achieve this, or further risks to the inflation outlook materialize, we would step up the pressure and broaden even more the channels through which we intervene, by altering accordingly the size, pace and composition of our purchases."

Boockvar said the global monetary party will be "full on and all in" assuming Draghi follows through on government bond purchases.

However, the focus on developments overseas came amid a quiet day on the U.S. economic front, leading to a lack of follow-through on the initial upward move.

Sector News

Most of the major sectors ended the session well off their best levels of the day, although considerable strength remained visible among steel stocks.

The NYSE Arca Steel Index surged up by 3.8 percent, continuing to regain ground after ending Wednesday's trading at its lowest closing level in over a year. The strength in the sector reflected optimism about the outlook for Chinese demand.

Energy stocks also continued to perform well throughout the day, benefiting from an increase by the price of crude oil. Crude for January delivery climbed $0.66 to $76.51 a barrel.

Chemical, semiconductor, and telecom stocks also ended the day notably higher, while most of the other major sectors showed more modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Friday. Japan's Nikkei 225 Index and Hong Kong's Hang Seng Index rose by 0.3 percent and 0.4 percent, respectively, while China's Shanghai Composite Index jumped by 1.4 percent.

The major European markets also showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index surged up by 1.1 percent, the German DAX Index and the French CAC 40 Index rallied by 2.6 percent and 2.7 percent, respectively.

In the bond market, treasuries moved modestly higher over the course of the session after initially show a lack of direction. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, dipped 2 basis points to 2.315 percent.

Looking Ahead

While next week's trading will be interrupted by the Thanksgiving Day holiday on Thursday, traders will be presented with a slew of economic data, particularly on Wednesday.

Reports on third quarter GDP, durable goods orders, personal income and spending, and new home sales are likely to be in focus.

Additionally, Hewlett-Packard (HPQ), Deere (DE), RadioShack (RSH), and Campbell Soup (CPB) are among the companies due to report their quarterly results next week.