By Matt Jarzemsky
U.S. stocks traded mostly higher Friday, with the Dow
industrials on pace to cap their biggest monthly gain since
February.
The Dow Jones Industrial Average swung between slim gains and
losses during the quiet session before the Labor Day holiday
weekend, dropping 12 points, or 0.1%, to 17067 in midafternoon
trading. Still, the blue-chip benchmark was up 3.2% on the month
and headed for its fourth-straight weekly gain.
The S&P 500 added three points, or 0.1%, to 2000. The Nasdaq
Composite Index rose 14 points, or 0.3%, to 4572.
Stocks have benefited from better-than-expected corporate
earnings, improvement in much of the U.S. economy, and investors'
distaste for low-return prospects in such other assets as bonds.
That positive backdrop has helped stocks to grind higher on a slow
week ahead of Monday's holiday in the U.S., when the stock market
will be closed.
When it comes to corporate earnings and the economy, "growth
looks relatively modest but, no matter how you look at the equity
market, it really doesn't look overvalued," said Margie Patel, who
oversees $1.4 billion in stocks and bonds as a senior portfolio
manager at Wells Capital Management.
"You could make a case that over the next 12 months, equity
returns will be more modest than over the last 12 months," she
added. But Ms. Patel said she expects interest rates to remain low,
particularly because of the lack of inflation in the U.S. economy,
adding, "I think equity returns will surpass those in almost all
areas of the fixed-income market."
Traders said the level of activity was low Friday, in line with
the market's recent summer lull. So far this week, an average 4.38
billion shares have changed hands daily, 30% below the year-to-date
average, according to FactSet.
Shares of particularly risky sectors outperformed. The Russell
2000 index of small companies' shares was up 0.5%. The Nasdaq
Biotechnology Index added 0.6%.
Bonds also moved toward closing out a big monthly rally, fueled
by optimism central banks will maintain an accommodative stance
toward markets. The 10-year U.S. Treasury note was little changed
in thin trade Friday, yielding 2.34%. But so far this month, the
note's yield--which moves inversely to its price--is on pace for
its biggest slide since January.
On the economic front Friday, household spending fell 0.1% in
July, the Commerce Department reported, bucking economists' median
forecast for a 0.1% increase. Personal income rose a
less-than-expected 0.2%.
Russian President Vladimir Putin on Friday used harsh language
against Ukraine and its allies over the failure of peace talks.
Ukraine has accused Russia of sending troops to fight alongside
rebels in eastern Ukraine.
European stocks rose Friday, with the Stoxx Europe 600 adding
0.3%, reversing earlier gains. The euro zone's annual rate of
inflation fell to 0.3% in August from 0.4% in July. That is a far
cry from the European Central Bank's medium-term target of
inflation just under 2%. The continued decline in inflation has
added to expectations that the ECB will be forced to take more
aggressive action to boost the region's economic recovery.
In corporate news, Avago Technologies rallied 7.2% and hit a
record high after the chip company reported better-than-expected
quarterly results.
In commodity markets, crude-oil futures rose 1.4% to $95.85 a
barrel. Gold futures fell 0.2% to $1,287.90 an ounce.
Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com