The Dow Jones Industrial Average succumbed to weakness in defensive sectors as health care and utilities. Tech stocks provided the leadership in a session that saw heavy volume on end of quarter portfolio adjustments by money managers and the reshuffling of the Russell 2000 Index.
Stocks, which traded heavily towards the end of the session, also received a boost on economic data that suggests there's light at the end of the tunnel -- and a turnaround is in the foreseeable future.
The Nasdaq remained open for trading until 5 p.m. ET to compensate for failed trades during its 80-minute system outage. An apparent surge in trading volume forced the No. 2 U.S. stock exchange to shut down its SelectNet and SOES stock order routing systems, making it difficult to execute orders. The timing for the outage could not have been worse with the reshuffling of the Russell index and end of quarter adjustments, which had managers scrambling to pretty up their portfolios. The system was shut down shortly after 2:30 p.m. ET and restored at 3:51, though trade executions continued to be spotty throughout the rest of the session.
Friday's session marked the first time in six quarters that all three major indexes closed in positive territory for the quarter. The Nasdaq gained about 18% for the quarter, while the S&P 500 added 6% and the Dow Jones Industrial average rose some 7%.
Techs were strong on the heels of the U.S. Appeals Court for the District of Columbia reversal of a lower-court order that Microsoft (MSFT
) be broken in two. The activity in the market reflects prospects investor optimism for a less regulatory business environment.
Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum, says the relative strength in techs is demonstrates how important the Microsoft decision is to the sector. He also says the Fed easing is a factor. "There's still a little exuberance over the Fed decision, coming to the conclusion that the quarter move was the correct move in many peoples' eyes," he says. "The reaction is positive that the Fed is looking to negotiate the end of an interest rate cycle and time it towards the economy stabilizing or turning up sometime in the third or fourth quarter."
Speaking on the Fed move, the strategist says he believes the quarter-point cut was the right decision. "I think there's some understanding that the quarter point move represents something more important than just some people's perceptions that the Fed is not being aggressive enough," he says. "I think [cuts] are now going to get more moderate, leave open the opportunity for further interest rate cuts and I think that's very pleasing to the market."
Friday's economic data reports included U.S. first quarter gross domestic product (GDP), which was revised down to a 1.2% gain from a gain of 1.3% previously. Personal consumption was revised up to a 3.4% growth rate from a gain of 2.9%. Nonresidential fixed investment was revised lower to a gain of 1.9% from a 2.1% advance. Exports were revised higher to a decline of 0.9% from a drop of 2.7%, as were imports, going from a drop of 9.1% to a decline of 5.4%.
In other economy-related news, the Chicago purchasing managers index (PMI) rose to 44.4 in June from 38.7 in May. The data suggests factory weakness might be ebbing. University of Michigan's Consumer Sentiment Index was revised to up 92.6 in June from 91.6 originally reported and up from 92.0 in May.
Among today's other stocks in the news, is the possible conclusion of the General Electric (GE
)-Honeywell International (HON
) merger saga. Honeywell today proposed reducing the price of GE's buyout offer, in an attempt to salvage a deal on shaky ground because of European Union antitrust concerns. Honeywell offered to reduce the amount of stock GE would pay for Honeywell, effectively reducing the value of the deal from to 39.5 billion from $41.7 million. General Electric, in a move that likely kills the deal, refused this proposal.
The Dow Jones Industrial Average lost 66.49 points, or 0.63%, to 10,499.72. The Nasdaq Composite climbed 34.12 points, or 1.61%, to 2,159.58. Meanwhile, the broader S&P 500 index lost 1.84 points, or 0.15%, to 1,224.36.
Treasuries were lower on growing concerns that the Fed easing cycle is nearing its end. Treasuries are likely to quiet down and take on a more consolidative tone ahead of the holiday-shortened week. Treasuries are likely to be pushed and pulled by quarter-end (half-year-end) portfolio re-balancing, data, and equities.
European markets closed mixed. In London, the Financial Times 100 Index was up 4.10 points, or 0.07%, to 5642.50. France's CAC 40 Index was up 91.77, or 1.79%, to 5225.33. In Germany, the Dax Index gained 58.72, or 0.98%, to 6030.49.
Asian markets ended higher. In Japan, the Nikkei gained 289.17, or 2.28%, to close at 12969.05. In Hong Kong, the Hang Seng Index rose 214.71, or 1.67%, to close at 13042.53. By Alan Hughes in New York