After a three-day sell-off, major indexes showed some signs of life. Treasury yields pulled back but remained above 5%
Stocks moved higher Friday, recovering slightly from three days of steep losses including the worst three-day decline in the Dow Jones Industrial Average since February.
Rising Treasuries helped stocks Friday, in contrast to the previous session when traders dumped stocks as yields on Treasury bonds pushed well above the symbolic mark of 5%. The yield was at a 10-month high, causing some observers to wonder if inflation is in the air.
The U.S. trade deficit narrowed to $58.5 billion in April, from $62.4 billion in March. The trade deficit with China rose 12% to $19.4 billion. The deficit is smaller than expected and good news for the economy, Action Economics says.
While other traders have predicted a larger 3 to 7% correction for the markets, Todd Salamone of Schaeffer's Investment Research believes the week's sell-off is a "temporary setback in the context of an ongoing bull market." Retail investors still haven't bought into the market yet, he says, and hedge funds and money managers are being very cautious. That skepticism helps "cap rallies" but also prevents "panic sells" as traders look for bargains, Salamone says.
On Friday, the Dow Jones industrial average was up 157.66, or 1.19%, to 13,424.39. The broader S&P 500 index, was up 16.95 points, or 1.14%, at 1,507.67.
The tech-heavy Nasdaq Composite index was up 32.16 points, or 1.27%, to 2,573.54.
On Thursday, the Dow lost 1.5% of its value, for a 199 point drop, and the S&P 500 and Nasdaq both fell more than 1.75%.
In the energy markets Friday, July crude oil futures on the NYMEX were down $2.17 to $64.76 a barrel.
Among stocks in the news on Friday, U.S. Steel (X) moved up after reports German steelmaker ThyssenKrupp AG is interested in buying the company.
Nordstrom, Inc. (JWN) was up almost 3% after it was upgraded by Bear Stearns to outperform from peer perform after it reported a preliminary 6.3% rise in May sales on Thursday.
Tyco International (TYC) was up 3.6% after its board approved the spin-off of its health care and electronics businesses through a tax-free dividend to be distributed June 29. Shareholders will receive one share of Covidien Ltd. and one share of Tyco Electronics for each four shares of Tyco they won.
Tellabs Inc. (TLAB) moved lower after it was downgraded by Goldman Sachs analyst from neutral to sell.
McDonald's Corp. (MCD) moved higher after it reported sales were up 8.7% in May at restaurants open at least 13 months. Sales were 12% higher systemwide. Deutsche Bank has reportedly upgraded the stock.
Deere & Co. (DE) was up after saying it was seeking Chinese government approval to buy a Chinese tractor maker, Benye Tractor & Automobile Manufacture Co.
Multimedia Games (MGAM) was up almost 2% after saying it will buy spend up to $25 million to repurchase more than 7% of its outstanding shares.
European stocks were mixed. In London, the FTSE 100 index was flat at 6,505.10. Germany's DAX index moved down 0.37% to 7,590.50. In Paris, the CAC 40 index was off 0.12% to 5,883.29.
Asian markets were mostly down, except in China. In Japan, the Nikkei index was down 1.52% to 17,779.09. In Hong Kong, the Hang Seng Index was off 1.4% to 20,509.15. And China's Shanghai Composite moved up 0.57% to 3,913.14.
Treasuries recovered a bit on Friday, after falling this week and pushing yields up past 5%. On Friday, the 10-year note rose 05/32 to 95-08/32 for a yield of 5.10% and the 30-year bond rose 07/32 to 92-00/32 for a yield of 5.22%.