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James Hyerczyk
U.S. Stock Indices

The major U.S. stock indexes finished higher on Friday, but mixed for the week. Traders posted a muted reaction to a weaker-than expected earnings report from Intel, instead choosing to focus on developments regarding a potential end to the partial government shutdown.

Their bets on the deal to end the shutdown may have paid off as President Trump announced that he reached a continuing resolution with Congress to reopen the U.S. government. According to the President’s statement, the temporary deal will fund the government for three weeks until February 15.

In the cash market, the benchmark S&P 500 Index settled at 2664.76, up 22.43 or +0.85%. For the week, the index was down 0.2%. The blue chip Dow Jones Industrial Average closed at 24737.20, up 183.96 or +0.75%. It finished 0.1% for the week. The tech-based NASDAQ Composite finished at 7164.87, up 91.41 or +1.30%. It settled the week up 0.1%.

Positives Piling Up

Despite the meager weekly performance, the news remained upbeat at the end of the week. Most importantly, the fact that the government will be reopening and the Republicans and Democrats will be talking, has to be a positive. Unfortunately, it came at the expense of a great loss to the economy.

A potential change in Federal Reserve Policy was also supportive for prices. According to the Wall Street Journal, the Fed is closer than expected to ending its balance sheet reduction. Investors will be eyeing next week’s Fed monetary policy decision for news of the end of the balance sheet unwind. This is because investors will use the information as a gauge to measure Fed tightening policy. An earlier ending to this form of tightening should be bullish for stocks.

U.S.-China trade relations dominated the news last week, and may have been responsible for putting a lid on the rally. Reports that a high-level meeting between both economic powerhouses had been canceled spooked buyers, but these reports were denied by both parties. Nonetheless, the news created enough tension to keep many buyers on the sidelines.

By the end of the week, the tone turned a little more positive as Treasury Secretary Steven Mnuchin projected confidence about the status of the negotiations, saying both sides were “making a lot of progress” in the talks.

Finally, technology stocks have become attractive again and this is encouraging investors to take on more risk. This is helping to underpin the indexes on short-term dips while holding them near multi-month highs as investors await more positive news about the end of the government shutdown, the end of the Fed’s balance sheet reduction and the end of trade dispute.

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