Stocks Rise as Choppy Week on Wall Street Nears End

By Joe Wallace and Karen Langley

U.S. stocks rose Friday as retail sales data beat expectations, putting major indexes on pace to end to a volatile week with modest gains.

Investors have been grappling with questions about the strength of the economic recovery, the spread of the coronavirus and the status of negotiations in Washington over additional fiscal stimulus. Stocks started the week strong Monday before pivoting to record three days of declines.

By mid-morning Friday, all three major stock benchmarks were on course to end the week in positive territory, with gains of at least 0.4%.

The S&P 500 was up 0.6% for the session, while the Dow Jones Industrial Average had advanced 0.9%, or about 253 points. The tech-heavy Nasdaq Composite had gained 0.3%.

Investors point to reasons beyond the daily headlines to feel optimistic about the future for U.S. equities. Low yields on government bonds have increased the appeal of stocks, and the economy is healing from the coronavirus-induced downturn, though there are signs the recovery has slowed.

Fresh data Friday showed U.S. retail sales rose for a fifth month in a row in September as consumers spent in preparation for further months of working and studying from home. Sales climbed 1.9%, the Commerce Department said, faster than the 0.7% analysts were expecting.

"The economy's been holding up very well, considering everything that's gone on," said Neil Hennessy, chief investment officer at Hennessy Funds. "There's a lot that's really going on that's good, and it's just going to get better as we start to open up this economy."

Daily headlines have sent cautionary signals about how quickly that reopening may unfold. More than half a dozen states reported record numbers of new coronavirus cases, pushing the U.S.'s single-day total above 60,000 for the first time in over two months. Midwestern states including Ohio, Wisconsin and Michigan were particularly hard hit.

"There are some pretty significant concerns that we're going to see a ramp-up in infections in the U.S.," said Ronald Temple, head of U.S. equity at Lazard Asset Management. "I am worried that could be a headwind between now and year-end."

Investors are also focused on developments in talks over another batch of economic stimulus. Many analysts say a new round of relief would help keep the U.S. economy in recovery mode.

White House and Democratic negotiators agreed Thursday to include a national coronavirus-testing strategy in relief legislation. Many Republican lawmakers are wary of approving another bill approaching $2 trillion in size, but President Trump on Thursday insisted they will back him despite their current misgivings.

"They might get something together, but it's really surprising that it hasn't happened yet," said Jonas Goltermann, senior markets economist at Capital Economics.

Consumer spending may falter over the winter if Washington doesn't deliver a new round of stimulus, according to Mr. Temple. "The longer this persists without that extra unemployment benefit the more likely we are to see evictions, mortgage delinquencies and other kinds of credit defaults," he said.

Other data indicate the economy is already losing momentum. New applications for unemployment benefits, a proxy for layoffs, last week rose to the highest level since late August.

Another factor weighing on stocks is concern about how quickly drugmakers will be able to come to market with an immunization shot, Mr. Goltermann added, pointing to the pause in trials of Johnson & Johnson's vaccine. "That's arguably even more important than the fiscal stimulus."

Pfizer said it could be ready to apply for emergency-use authorization of its vaccine by late November, the first time a leading Western vaccine developer provided such a specific timeline. Shares in the pharmaceutical giant rose 2.3%.

As earnings season continues, J.B. Hunt Transport Services shares dropped 8% after profits fell short of expectations in the third quarter. Citizens Financial Group shares fell 3.7% after the bank said provisions for credit losses dragged down earnings.

In overseas markets, European stocks recouped some recent losses, pushing the Stoxx Europe 600 up 1.3%. Asian markets were mixed by the close of trading, with China's Shanghai Composite Index ticking up 0.1% and Japan's Nikkei 225 losing 0.4%.

The yield on the 10-year U.S. Treasury ticked up to 0.747%, from 0.730% Thursday. Bond yields rise as prices fall.

Write to Joe Wallace at [e-mail] and Karen Langley at [e-mail]

(END) Dow Jones Newswires

10-16-20 1234ET