NEW YORK: U.S. stocks closed higher on Friday as fears of an interest-rate hike ebbed with the S&P 500 and the Nasdaq posting weekly gains, but the Dow Jones Industrial Average extended its losing streak for a fourth week.
The S&P 500 index SPX, +0.60% added 12.28 points, or 0.6%, to close at 2,052.32, led by gains in technology and health-care shares. The large-cap index snapped a three-week losing streak and rose 0.3% for the week.
The Dow Jones Industrial Average DJIA, +0.38% gained 65.54 points, or 0.4%, to finish at 17,500.94 but the index is down for a fourth week, shedding 0.2%.
Tech-heavy Nasdaq Composite COMP, +1.21% jumped 57.03 points, or 1.2%, to close at 4,769.56. The index came off of fourth straight weeks of losses to post a weekly gain of 1.1%.
“Stocks have been choppy since the [FOMC] minutes but a hike in and of itself isn’t likely a bad thing for stocks as long as the data supports it. But there is probably some fear of a policy error — in other words hiking too much and killing economic growth — given the anemic global growth,” said Bill Stone, chief investment strategist at PNC Asset Management Group.
Friday’s gains follow a day of losses on Thursday, when worries that the Fed could hike interest rates in June sent markets lower in both the U.S. and Europe. The S&P 500 index closed down 0.4%, turning negative for 2016, while the Dow average ended down 0.5%, and the Nasdaq Composite lost 0.6%.
“Markets tend to react to news of interest rate increases in two phases. The first reaction is often negative as the fast money that has capitalized on easy lending pulls back as the liquidity party winds down,” said Colin Cieszynski, senior market analyst at CMC Markets.
The second phase, Cieszynski said, is what the market is witnessing now as investors focus on the benefits of a strengthening economy rather than the drawbacks of higher interest rates.
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Some market strategists remain skeptical of an imminent hike, arguing that the Fed will instead wait for several upcoming events—most notably the U.K. referendum on European Union membership in June, and possibly the U.S. election this fall—to pass. The U.K. vote takes place about a week after the June Fed meeting.
All of these risks also pose a problem for markets, too, said Ian Winer, managing director at Wedbush Securities. “If any one of those becomes a problem, you have an asymmetric risk to the downside,” he added.
Investors are not yet convinced that the Fed will press ahead with tightening its monetary policy given mixed signals before.
“There’s still a question in the market as to whether or not the Fed will go ahead with a rate hike this summer. After all, we’ve experienced similar telegraphing from Fed officials only to have Chair Yellen rebuff their comments,” Quincy Krosby, market strategist at Prudential Financial, said.
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