Stocks slipped last week as investors fretted over the possibility that interest rates around the world will rise more quickly than the market has anticipated.

The Dow Jones Industrial Average fell 68 points, or 0.4%, to 18,240.49, while the Standard & Poor’s 500 index dropped 15 points to 2153.74. The Nasdaq Composite also slipped 0.4%, to 5292.40.

The headline economic news was generally strong. The economy added 156,000 jobs in September, modestly below estimates, as the workforce expanded and wages rose; both manufacturing and nonmanufacturing production grew in the U.S. But the positive data did little to boost markets.

European Central Bank officials denied a report they were considering ways to wind down their bond purchases, but the prospect clearly worried investors. British Prime Minister Theresa May said in a speech that low-rate policies had hurt savers and “change has got to come,” a possible nudge to the Bank of England.

“You’re seeing clear evidence that central banks are running out of steam,” says Peter Boockvar, chief market analyst at the Lindsey Group. Without continued stimulus from central banks, investors will have little patience for companies that can’t increase their earnings consistently. “Look what happened” to Honeywell International (ticker: HON), Boockvar says. The industrial conglomerate surprised investors when it cut its earnings and sales estimates because of weakness in multiple units. Shares fell 7.5% on Friday.

With operating earnings for the S&P 500 set to fall for the sixth straight quarter, investors will continue to punish companies that can’t hit their targets, Boockvar predicts. “Without the help from central banks, there will be much less tolerance for earnings misses, earnings declines,” he says.

Rate anxiety was evident in the kinds of stocks that fell during the week. High-yielding companies such as telecom firms, utilities, and real estate investment trusts led the market lower, notes Jason Pride, director of investment strategy at Glenmede. “It’s all tied to this rate chatter,” he said. “It’s like a whisper in the background.”

Nonetheless, Pride says economic growth should continue to buoy markets in the longer run. “All this chatter in the background will move the markets daily or weekly,” he says. “But at the end of the day we’re in an economic expansion, and it doesn’t look like it’s stopping. It’s slow, but it’s still going. That should carry risk assets, that should carry equities.”

(Source: Barrons Online)

U.S. stocks finished an up-and-down week on a positive note, helped by a strong showing from energy stocks and an easing of concerns about the viability of Deutsche Bank, Germany’s largest bank.

The bank’s Frankfurt-listed stock closed Friday at 11.57 euros, up 6.4% on the day. It was also a sign the market is less worried, at least for now, about the bank’s stability than it was earlier in the week, after reports put Deutsche Bank in settlement talks involving billions of dollars concerning a mortgage-security probe by the U.S. Justice Department. Financial companies in the Standard & Poor’s 500 index responded positively, gaining 1.43% on Friday.

The S&P 500 finished the week, having gained 0.80% during Friday’s session to close at 2,168.27. That is about 22 points off its all-time high of 2,190 set on Aug. 15.

Still, “we are on pins and needles,” says Chris Hyzy, chief investment officer at Bank of America’s global wealth and investment-management division. With the third quarter in the books, “we know that October holds more risks,” he adds. He cites the uncertainty of the upcoming presidential election, the possibility of a rate hike in the U.S. late in the year, and concerns about Deutsche Bank’s financial strength as key worries that investors are trying to assess.  Yet Hyzy remains upbeat about U.S. stocks, convinced that the third-quarter earnings season will be solid.

Even though it was a so-so week for stocks, there were some nice gains, especially in energy. The Dow Jones Industrial Average gained 0.26%, lifted by an increase of nearly 1% on Friday. One of its constituents, ExxonMobil (XOM), was the second-best performer in the Dow, with a gain of nearly 5% last week. Chevron (CVX) rose about 4%.

The two stocks got a nice boost from rising oil prices. The price of West Texas Intermediate crude finished at more than $48 a barrel, up about 8% on the week. Undergirding the increases was last week’s surprising news that the Organization of Petroleum Exporting Countries had agreed to cut production, a move that should help support oil prices if the deal is actually carried out.

(Source: Barrons Online)