The Dow Jones Industrial Average edged higher Friday, capping off its strongest two-week stretch since February in a sign the inflation- and trade-fueled anxieties that had sent the blue-chip index stumbling earlier this year are abating.
Investors continued to tamp down their fears of an all-out trade war between the world’s two biggest economies and bought stocks that had been whipsawed by the threats the U.S. and China have leveled at one another.
Those fading concerns removed a major hurdle for the Dow industrials to move higher. The index has climbed for eight of the past 10 sessions, adding more than 800 points, or 3.2%, to notch the blue-chip index’s best two-week stretch since Feb. 23.
That was even as technology stocks, a major contributor to the 9 ½-year rally, ended the week slightly lower. But shares of financial companies, which had been out of favor for much of the year, helped to offset those losses, as banks like JPMorgan Chase and Goldman Sachs benefited from bond yields nearing their highest levels of the year.
While investors welcomed the Dow’s return to a record-setting pace, investors warned the index remains vulnerable to the continuing trade battle, especially since its components get a bigger portion of their revenue from overseas and China compared with the S&P 500.
The next test will be Monday, when the $200 billion of tariffs on Chinese imports President Trump recently announced are set kick in, first at 10% and then rising to 25% at the end of the year.
“While [trade talks] aren’t as adversarial” as they were several months earlier, said Eric Wiegand, senior portfolio manager at U.S. Bank Wealth Management, “we’re not at a resolution either.”
Investors like Mr. Wiegand viewed the Trump administration's stepped approach to the latest tariffs as an attempt at easing tensions. Hopeful that a resolution will eventually be reached, investors are focusing more on the strong fundamental outlook that has underpinned the stock market this year, including solid corporate earnings and a robust U.S. economy, which is growing at its fastest rate since 2014.
“We’re clearly anxious to get back to earnings season in a few weeks,” Mr. Wiegand added.
The Dow Jones Industrial Average rose 86.52 points, or 0.3%, to 26743.50, its 13th record close of the year and second this week. The S&P 500 slipped 1.08 points, or less than 0.1%, to 2929.67, while the Nasdaq Composite fell 41.28 points, or 0.5%, to 7986.96.
Like the Dow, the S&P 500 ended the week higher, gaining 0.8%. The Nasdaq, however, slipped 0.3% and has fallen two of the past three weeks.
Shares of trade-sensitive Boeing led the Dow higher Friday, gaining $4.77, or 1.3%, to $372.23, contributing roughly 32 points to the index’s gain. McDonald’s , meanwhile, added 4.51, or 2.8%, to 165.30 after the fast-food chain raised its dividend late Thursday.
The S&P 500 and the Dow Jones Industrial Average are on pace to reach weekly gains. Photo: bryan r. smith/Agence France-Presse/Getty Images
Trading was particularly volatile Friday due to a so-called quadruple witching, when four types of derivatives—index options, index futures, single-stock options and single-stock futures—all expire on the same day.
Some money managers added that a major revision to the S&P 500 index sectors likely also contributed to the volatility. Index providers S&P Dow Jones Indices and MSCI are officially creating a new communication-services sector to replace telecommunications, the smallest of the index’s 11 sectors. S&P was expected to complete its reclassification Friday, while many others who use it are expected to wrap up by Sept. 28.
Elsewhere, the Stoxx Europe 600 rose 0.4% to push its weekly gain to 1.7%. Most indexes in Asia rallied, with Chinese stocks registering their largest one-week percentage gain since 2016.
In addition to monitoring the implementation of the latest tariffs, investors are also looking to next week’s Federal Reserve meeting. Most watchers are expecting the U.S. central bank to raise interest rates.
“With the economy doing well and inflation not picking up much, it has been easy for the Fed this year,” said Eric Stein, co-director of global income at Boston-based Eaton Vance, who is expecting a rate increase next week and one more in December. “A year from now is where it gets more interesting.”