Wall Street closed higher on Friday as investors picked up stocks on the dip. All three major stock indexes ended in green. However, market participants remained concerned about the gradual pull back of monetary stimulus, growing spread of the Delta string of coronavirus and possibility of a slowdown of the U.S. and global economic recovery. For the week as a whole, the three major stock indexes ended in red.

How Did The Benchmarks Perform?

The Dow Jones Industrial Average (DJI) rose 0.7% or 225.96 points to close at 35,120.08, reversing a three-day losing streak. Notably, 25 components of the 30-stock index ended in the green while 5 in red. Moreover, The tech-heavy Nasdaq Composite finished at 14,714.66, gaining 1.2% or 172.87 points due to strong performance by large-cap technology stocks.

Meanwhile, the S&P 500 moved up 0.8% to end at 4,441.67. The Technology Select Sector SPDR (XLY) and  the Utilities Select Sector SPR (XLU) advanced 1.3% each. All eleven sectors of the broad-market index closed in positive territory.

The fear-gauge CBOE Volatility Index (VIX) was down 14.4% to 18.56. A total of 8.72 billion shares were traded on Friday, lower than the last 20-session average of 9.21 billion. Advancers outnumbered decliners on the NYSE by a 2.37-to-1 ratio. On Nasdaq, a 2.21-to-1 ratio favored advancing issues.

Technology Giants Rebound

Shares of several technology behemoths rallied on Friday on concerns of slowing pace of the U.S. and global economic recovery. The yield on the benchmark 10-Year U.S. Treasury Note fell 3.8 basis points in last week as investors opted to buy safe-haven government bonds instead of risky equities. Lower market risk-free returns are good for growth stocks like technology.

On Aug 20, shares of technology bigwigs like Microsoft Corp. (MSFT Quick QuoteMSFT - Free Report) , Cisco Systems Inc. (CSCO Quick QuoteCSCO - Free Report) and NVIDIA Corp. (NVDA Quick QuoteNVDA - Free Report) climbed 2.6%, 1.7% and 5.1%, respectively. Microsoft carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Concerns on Slowing Pace of Economic Recovery

The July FOMC meeting minutes of the Fed revealed that an increasing number of its officials are advocating tapering of the central bank's existing $120 billion per month bond-buying program as early as October. Since March 2020, the Fed is buying $80 billion of Treasury Notes and $40 billion mortgage-backed bonds per month in order to keep sufficient liquidity in the economy against cornavirus-led devastations.

Meanwhile, mounting inflationary pressure over the last three months have compelled many Fed officials to support tapering of the quantitative easing program. However, market participants are concerned that a shift from the central bank's ultra-dovish monetary stance will slow the pace of the U.S. economic recovery.
 
A reduction of the quantitative easing program will raise market interest rate. Therefore, businesses will no longer get access cheap credit. Moreover, a major part of fiscal stimulus, in the form of weekly unemployment benefit will terminate in September. This may reduce aggregate demand. Recently released a few mixed economic data of the United States and China also aggravated this concern.

Weekly Roundup

Wall Street retreated last week after gaining two weeks in a row. The Dow, the S&P 500 and the Nasdaq Composite fell 1.1%, 0.6% and 0.7%, respectively. Additionally, the small-cap-centric Russell 2000 dropped 2.5%.

Reopening sectors like energy and financials declined 7.3% and 2.3%, respectively, while the defensive sectors such as consumer staple, health care and utilities rose 0.4%, 1.8% and 1.8%, respectively, on concerns of slowing pace of economic recovery.  The future price of the U.S. crude oil benchmark the WTI plummeted 7.6% in last week.