US stocks hovered near the flatline on Friday, with investors bracing for potential volatility later in the session as a hefty batch of options is set to expire, typically amplifying market swings. Despite the choppy intraday action, all three major indexes remain firmly on track to log solid weekly gains, reflecting a more upbeat tone in markets compared to earlier in the month.
US stocks on track for big weekly gain
Sentiment improved notably after encouraging signals on the trade front, as both the US and China agreed to temporarily reduce certain tariffs, easing fears of a fresh escalation in their long-running trade dispute. This détente provided some relief to global markets, which had been jittery over geopolitical risks and supply chain disruptions.
At the same time, a steady drumbeat of mostly underwhelming economic data has reinforced expectations that the Federal Reserve will have ample room to cut interest rates at least twice this year, providing an additional cushion for equities. Housing starts and building permits both came in weaker than expected, pointing to softness in the housing market, while export and import prices posted surprise increases, complicating the inflation narrative. Earlier in the week, inflation figures came in below forecasts and retail sales data disappointed, adding to the case for looser monetary policy.
Megacap stocks were mixed
In the tech sector, megacap stocks were mixed, reflecting the cautious mood. Apple edged up 0.2%, Nvidia added 0.6%, and Alphabet advanced 2.3%, while Microsoft slipped 0.6% and Meta fell 0.9%, with investors rotating selectively within the sector. For the week, the performance has been more decisive, with the Dow Jones Industrial Average up 2.6%, the S&P 500 gaining 4.5%, and the tech-heavy Nasdaq surging over 6%, driven by optimism around easing trade tensions, falling bond yields, and expectations of more accommodative central bank policy in the months ahead.
Looking ahead, traders will be closely watching next week’s Fed minutes and comments from key policymakers for further clues on the timing and scale of potential rate cuts, while keeping an eye on developments in the US-China trade talks, which continue to be a major driver of sentiment.
