Midday Market Update: Optimism Emerges

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The major U.S. stock indices were pressured by midday Friday, but with leadership from economically sensitive stocks on a day which saw several negative developments regarding the economic recovery. 

The S&P 500 was flat to up a tick, held back by the tech-heavy Nasdaq’s loss of 0.2%. The 10-Year Treasury yield fell to 0.69% from 0.72%, a risk-off signal. Yields fall when prices rise. 

The yield had risen sharply this week, as the Treasury Department issued tens of billions of dollars of new long-term bonds, putting supply pressure on the price of treasuries. yields fall when prices rise. The yield had risen sharply this week, as the Treasury Department issued tens of billions of dollars of new long-term bonds, putting supply pressure on the price of treasuries. Most investors believe interest rates are bound to remain depressed for some time, as uncertainty over the economic recovery remains a theme. Low rates are supportive of stocks, but reflective of the shaky environment. 

Negatively, Senate lawmakers followed House Democrats in adjourning for the summer break, which means there will be no fiscal stimulus until at least September. Meanwhile, states have paused reopenings and small businesses need cash in order to keep employees. This is a threat to the currently speedy economic recovery. 

And even with retail sales for July coming in at a 1.2% increase year-over-year, against estimates of 2% and a sharp drop-off from June’s reading of up 8.4%, consumer discretionary was rising. And other cyclical sectors related to the consumer rose as well. 

The VanEck Vectors Retail ETF  (RTH) - Get Report rose 0.4%. Oil and banking rose about 1%, while industrials and materials rose a tick as well. In the morning, all of these cyclical sectors were down. 

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