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Stocks Recover, But Finish the Week With Losses

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05/15/2020 | 06:03pm EDT

By Anna Hirtenstein , Xie Yu and Gunjan Banerji

U.S. stocks edged higher Friday but notched weekly declines after a wide range of data this week revealed the sharp contraction in economic activity across the nation.

Meanwhile, the possibility of renewed trade tensions between the U.S. and China came to the forefront, igniting concerns about relations between two of the biggest world economies at a time when the U.S. is already facing a massive downturn.

Major indexes fell to start the day before turning higher. The Dow Jones Industrial Average rose 60.08 points, or 0.3%, to 23685.42. The S&P 500 rose 11.20 points, or 0.4%, to 2863.70. The Nasdaq Composite added 70.84 points, or 0.8%, to 9014.56.

Still, the Dow and S&P 500 fell 2.7% and 2.3%, respectively, this week. The Nasdaq lost 1.2%.

Industrial production figures for April showed a sharp downturn with an 11.2% drop. Data released by the U.S. Census Bureau showed retail sales fell a record 16.4% in April from a month earlier, as nonessential stores were forced to close. That surpassed a 12% estimate from economists surveyed by The Wall Street Journal.

"The reality is setting in," said Anwiti Bahuguna, head of multiasset strategy at Columbia Threadneedle Investments. "Perhaps things are not as rosy as sort of this 'V-shaped' recovery that equity markets were implying."

Though U.S. stocks declined for the week, they have staged an impressive rebound from their March lows, up at least 25% through Friday.

In one bright spot, Americans' view of the economy improved in early May even as the novel coronavirus continued to spread. An index of consumer sentiment rose to 73.7 in the three weeks ending May 13, from 71.8 for the previous four weeks, according to a University of Michigan survey released Friday.

Friday's initial drop in stocks came after Reuters reported the Trump administration had moved to block shipments of semiconductors to Huawei Technologies, signaling an escalation in tensions between the U.S. and China.

"Given how dependent U.S. markets have been on technology companies driving their gains, if there's anything that's going to wear on the tech space, this will concern the whole market," said Seema Shah, chief strategist at Principal Global Investors. Anti-China rhetoric from the Trump administration is likely to continue into election season, she said.

As stocks slipped this week, investors bought Treasurys, sending the yield on the 10-year note down to 0.640% on Friday from 0.679% last week. Yields fall as bond prices rise.

China's economic activity showed some signs of improvement in April as the world's second-largest economy began returning to work, though rising joblessness continued to weigh heavily on consumer spending. Retail sales fell 7.5% in April, according to data reported Friday, slightly worse than consensus forecasts. Urban unemployment rose. The bright spot lay in industrial production's recovery last month, as it rose 3.9% to beat expectations.

The Chinese data shows that "you can send people back to work, but you can't make it mandatory for people to go out and buy stuff. The consumer psyche has been dented," said Peter Schaffrik, a global macro strategist at RBC Capital Markets. "It will be much more cautious and more difficult to reopen metropolitan areas that drive a good part of GDP such as Paris and London."

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com, Xie Yu at Yu.Xie@wsj.com and Gunjan Banerji at Gunjan.Banerji@wsj.com

 


Stocks mentioned in the article
ChangeLast1st jan.
DJ INDUSTRIAL -0.59% 26501.6 Delayed Quote.-7.14%
NASDAQ 100 -2.62% 11052.94579 Delayed Quote.26.56%
NASDAQ COMP. -2.45% 10911.59093 Delayed Quote.21.61%
PRINCIPAL FINANCIAL GROUP, INC. 0.26% 39.22 Delayed Quote.-28.69%
RISE, INC. 3.85% 27 End-of-day quote.-10.00%
S&P 500 -1.21% 3269.96 Delayed Quote.1.21%
SPACE CO.,LTD. -1.15% 771 End-of-day quote.-39.62%
THE GLOBAL LTD. -12.20% 223 End-of-day quote.-52.65%
WORLD CO., LTD. -2.36% 1323 End-of-day quote.-50.84%
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