Dow up 102 as investors grit teeth over rate call
Wall Street's last session of the week was marked by a cautious tone, with stock prices cutting early losses and ending higher as traders awaited next week's key decision on interest rates from the Federal Reserve.
The Dow Jones industrial average climbed 102 points, ending up 0.6%, after trading lower most of the morning. The broader Standard & Poor's 500 stock index climbed 0.5% and the tech-packed Nasdaq composite also finished 0.5% higher.
Friday also marked the 14th anniversary of the terror attacks on two towers of the World Trade Center in New York's financial district. Traders on the floor of the New York Stock Exchange held a moment of silence at 9:25 a.m. ET to honor those lost on 9/11.
Traders trepidation over whether or not the Fed will hike rates for the first time in more than a decade when it breaks from its two-day policy meeting Thursday has Wall Street playing it conservatively and safe today. No one is willing to make a big bet ahead of the closely watched decision.
The Dow has been unable to string together a number of up days in a row, a sign of investor uncertainty in the wake of the first stock market correction, or drop of 10%, since 2011 this summer.
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There's still no clear cut signal from the Fed as to whether they will pull the trigger or not, as they are confronted with a strengthening U.S. economy and job market (factors that favor a rate hike) and turbulence in financial markets recently due to global growth fears emanating from a slowdown in China (factors that argue against a rate hike). And Wall Street, for the most part, has no idea what the Fed will decide.
Anyway you slice it, investors' eyes -- at least for the moment -- are shifting from China to the Fed. Low rates, of course, have been a key driver of the stock market rally that began in March 2009 and uncertainty is on the rise as the Fed moves closer to hiking rates above the emergency level of roughly 0%.
"We expect the focus to turn from China to the Fed next week," Barclays told clients in a research note before Friday's opening bell on Wall Street. "China retail sales and industrial production are due on Sunday, but the Fed decision on 16-17 September looms large, when the Fed will also release updated economic projections, followed by (Fed chair Janet Yellen's) press conference."
Adding to the angst on Wall Street was a research report from Goldman Sachs oil analyst Jeffrey Currie that said there is a chance for U.S.-produced crude to dip as low as $20 a barrel due to persistent oversupply and lower demand expected from slowing emerging market economies. Currie lowered his 2016 price target for West Texas Intermediate crude to $45 a barrel, down from $57. The $20 oil call, however, was not Currie's base case and if crude did fall that far, he said the drop would be of a "transient" nature.
Markets around the globe also had a cautious and weak tone today. Shares of Tokyo's Nikkei 225 fell 0.2%, stocks in Hong Kong's Hang Seng index dipped 0.3% and shares of the volatile Shanghai composite index in mainland China edged up 0.1%, but remain down almost 40% since June.
In Europe, shares were lower. In London, the FTSE 100 was 0.6% lower. The CAC 40 in Paris was down 1% and Germany's DAX was down 0.9%.