New York: Rising fears that eurozone debt may drag the euro to the brink of collapse roiled markets this week, but US stocks managed to deliver weekly gains.
After a tumultuous five sessions dominated by Greece’s debt crisis and European efforts, the Dow Jones Industrial Average finished Friday 2.31% higher from a week ago, at 10,620.16.
The springboard for the positive finish, snapping two straight weekly losses, was Monday’s Dow rally of almost 4% on news the European Union and International Monetary Fund had agreed a trillion-dollar eurozone rescue.
The other major US indices also ended the week with solid increases. The tech-heavy Nasdaq composite index leaped to 2,346.85, a 3.58% rise from a week ago.
The S&P 500, a broader measure of the stock market, rose 2.23% to 1,135.68.
By the end of trading Wednesday, the market had clawed back the prior week’s heavy losses, including the 6 May “flash crash” of almost 1,000 points in intraday trade that upended global markets.
But this week’s gains hardly reflected the sour mood hanging over Wall Street on Friday, when the Dow fell 1.51%.
“By and large, Friday’s trade was one where returns were measured not in terms of what was up the most, but rather what was down the least,” said Patrick O’Hare, chief market analyst at Briefing.com.
Illustrating the hammering, O’Hare pointed out the S&P 500 had dropped 3.0% over Thursday and Friday, including a 1.9% decline on Friday “that was a byproduct of concerns related to Europe’s difficulties.”
The euro on Friday sank to 18-month lows against the dollar, nearing levels seen after the Lehman Brothers collapse in 2008 triggered a financial meltdown and global recession.
The stronger dollar weighed on dollar-priced commodities like oil, while financial stocks slid as investors weighed their exposure to the European debt crisis and its potential negative impact on the eurozone’s fragile recovery.
“Traders continue to grapple with the spending cuts required in the eurozone to reduce deficits, weighing on the growth outlook for both Europe as well as the global recovery,” Charles Schwab & Co. analysts said in a note to clients.
Positive US economic reports Friday on retail sales and industrial production were overshadowed by the market’s focus on Europe.
Investors next week will have a batch of indicators to digest, including data on inflation, with producer prices due out Tuesday and consumer prices Wednesday.
On Wednesday the minutes of the 27-28 April meeting of the Federal Reserve’s policymakers will be released.
Investors are expected to pore over the Federal Open Market Committee minutes for clues on the outlook on the economy and monetary policy.
“We look for the April FOMC minutes to show greater confidence among participants about the strengthening economic recovery, as reflected in the more upbeat description of household spending and labor market conditions” in the panel’s statement, Barclays Capital analysts said in a client note.
The minutes would also provide updated FOMC forecasts, they said. “We expect the FOMC to modestly raise its growth forecasts for 2010.”
Among other key data next week will be April housing starts and building permits on Tuesday, providing a view of the troubled real-estate sector, and the forward-looking leading economic indicators index on Thursday.
“There are a couple of important facets to the data docket in the coming week, although the financial market focus of late appears to be drifting back toward developments in Europe,” Joseph LaVorgna, chief US economist at Deutsche Bank Securities.