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Benchmarks notched up broad based gains on Friday after expectations of further rate hikes declining due to the low levels of inflation prevailing presently. Moreover, the increase in CPI for the month of June came in lower than expected. The Dow increase due to rally in the shares of Apple and the Nasdaq benefitted from the rising share prices of large-cap tech companies. The S&P 500 also ended in the green because of broadly encouraging economic conditions. However, the gains were curbed by escalating geopolitical tensions between Pyongyang and Washington. Both the blue-chip index as well as the S&P 500 suffered their second worst performance for the year.

The Dow Jones Industrial Average (DJIA) closed at 21,858.32, advancing 0.1% or 14.31 points. The S&P 500 Index (INX) increased 0.1%, or 3.11 points to close at 2,441.32. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,256.56, increasing 39.68 points or 0.6%. A total of around 6.15 billion shares were traded on Friday, below the last 20-session average of 6.29 billion shares. Advancing issues outnumbered decliners on the NYSE by 1.15-to-1 ratio. On the Nasdaq, advancers outnumbered decliners by a 1.10-to-1 ratio.

Stock Market Stabilizes After a Rough Week

The broader markets performed well on Friday, ending a three-day streak of losses. These gains were the result of investors betting that there would be no further rate hikes this year by the Fed because of relatively lower rates of inflation. Moreover, the Consumer Price Index increased 0.1% last month against expectations of a 0.2% increase. However, gains were curtailed after the existing tensions between Pyongyang and Washington intensified. Apart from the geopolitical tussle, analysts also blame seasonal variations in the market as the reason the weak performance of the market. The CBOE Volatility Index (VIX) decreased on Friday after hitting high levels on Thursday.
 

Gains for the Dow were broad based and were buoyed by an increase in the shares of Apple (AAPL - Free Report) . Six of the eleven primary sectors of the S&P 500 ended in the green, led by consumer-discretionary, technology and health-care sectors. The Select Sector SPDRs for consumer-discretionary (XLY), technology (XLK) and healthcare (XLV) stocks were up 0.5%, 0.7% and 0.3% respectively. The blue-chip index and S&P 500 suffered their second-worst weekly performances so far this year. The Nasdaq overshadowed the two other indexes as the tech-laden index ended in the green due to an increase in shares of large-cap tech companies because of broadly encouraging economic conditions.

Economic Data

As per the latest reports by the Labor Department, US consumer prices increased 0.1% last month against expectations of a 0.2% increase. This meager increase in CPI.1% comes after it remained unchanged in June. This boosted the year-over-year increase in CPI to 1.7% against 1.6% in June. The CPI has maintained the same rate of growth for three consecutive months. Also, the core CPI gained 1.7% in the last 12 months. 

The U.S. Central Bank has an inflation target of 2% which currently lingers around 1.5% since May. This forced economists to infer that the Fed might not increase the interest rates again this year as the targeted inflation rate continues to remain elusive. Also, the jobless rate is at a 16 year low which makes it difficult for the Fed to impose any sort of monetary tightening.,

Weekly Results

For the week, the Dow declined 1.1%, marking the biggest one-week drop since November. The S&P 500 lost 1.4%, suffering its worst weekly performance since March. The Nasdaq shed 1.5% for the week, its worst such loss since June and the third successive weekly decline. The blue-chip index started off the week on a high, but tumbled following President Trump’s warning to North Korea. Subsequently, the Dow also incurred losses, after shares of Disney (DIS - Free Report) declined following its decision to end the distribution deal with Netflix (NFLX - Free Report) . The S&P 500 and the Nasdaq mostly incurred broad based losses due to escalating geopolitical tensions between the US and North Korea. Moreover, the Russell 2000 index of small-cap stocks closed the week declining 2.7%. This marks its biggest one-week decline since February 2016.

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