Market Wrap: Stocks End a Volatile Week with a Surge

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AP/Richard Drew


NEW YORK — Good economic and corporate news helped the stock market stage a rebound at the end of a turbulent week of trading. Nike jumped after turning in higher profits, leading the Dow Jones industrial average higher.

The Standard Poor’s 500 index (^GPSC), the benchmark for most mutual funds, still lost 1.4 percent for the week. The biggest drop came Thursday, the worst day for the stock market since July 31.

A steep drop one day is often followed by gains the next as investors hunt for beaten-down stocks. “After yesterday, it’s only normal to get a little bit back because people tend to buy on the dips,” said Jason Pride, director of investment strategy at Glenmede Trust.

The Dow (^DJI) surged 167.35 points, or 1 percent, to close at 17,113.15 on Friday. The SP 500 index rose 16.86 points, or 0.9 percent, to 1,982.85 and the Nasdaq composite (^IXIC) climbed 45.45 points, or 1 percent, to 4,512.19.

The day started with good news. The government reported that the U.S. economy expanded at an annual rate of 4.6 percent in the spring, the fastest pace in more than two years. That was followed by a strong reading of consumer sentiment this month.

Nike (NKE) jumped 12 percent after reporting that solid sales and lower taxes helped drive its quarterly profit up 23 percent. Both its earnings and revenue beat Wall Street’s estimates. Nike’s stock gained $9.75 to $89.50, the largest gain among the 30 big companies in the Dow.

It was a roller coaster of a week. The Dow swung more than 100 points on all five days. The turbulence broke a long period in which the stock market rarely made a big move. Many investment strategists said investors should get used to it.

The sudden turbulence comes as investors speculate over the Federal Reserve’s next steps. Economists expect the Fed to raise its benchmark short-term interest rate next year, but nobody is sure exactly when. The Fed hasn’t raised that rate since June 2006.

“We’re getting closer and closer to the Fed’s first rate hike,” said Russ Koesterich, global chief investment strategist at the money manager BlackRock. “All that liquidity that the Fed created curbed volatility. As that liquidity recedes, volatility rises back to normal. We’re just starting to get a taste of what normal is like.”

Pride said he expects the market to resume its climb as the economy improves. “I think we’ll continue to grind higher because the economic momentum is still there,” he said.

Among other companies in the news, Janus’s stock soared 43 percent following news that famed bond-fund manager Bill Gross, a founder of bond giant Pimco, is leaving to join the firm. Janus said Gross, who ran the world’s largest bond fund, starts work next Monday. Janus jumped $4.78 to $15.89.

An investment fund with a stake in Yahoo sent a letter to Yahoo’s CEO urging the company to consider merging with AOL (AOL). Jeffrey Smith, who heads Starboard Value, wrote that a deal could save as much as $1 billion and create a more competitive company. Yahoo (YHOO) climbed $1.71, or 4 percent, to $40.66.

The euro continued to slide against the dollar, dipping to $1.268. It has lost more than 3 percent against the dollar this month.

The report on economic growth weighed on U.S. government bond prices, nudging yields up. The yield on the 10-year Treasury note climbed to 2.53 percent from 2.50 percent late Thursday.

In commodity trading, precious and industrial metals made slight moves. The price of gold fell $6.50 to settle at $1,215.40 an ounce. Silver slipped 10 cents to $17.54 an ounce. Copper was unchanged at $3.03 a pound.

The price of oil increased on expectations of rising demand in the U.S., where economic growth appears to be picking up steam. Benchmark U.S. crude rose $1.01 to close at $93.54 a barrel on the New York Mercantile Exchange. Brent crude, a benchmark for international oils used by many U.S. refineries, remained unchanged at $97.00 a barrel on the ICE Futures exchange in London.

In other energy trading on the NYMEX:

  • Wholesale gasoline fell 5.6 cents to close at $2.662 a gallon.
  • Heating oil added 0.5 cent to close at $2.701 a gallon.
  • Natural gas rose 1.3 cents to close at $3.984 per 1,000 cubic feet

What to Watch Monday:

  • The Commerce Department releases personal income and spending for August at 8:30 a.m. Eastern time.
  • The National Association of Realtors releases pending home sales index for August at 10 a.m.
  • The Federal Reserve bank of Dallas releases its survey of manufacturing conditions in Texas as 10:30 a.m.
  • Cintas (CTAS) releases quarterly financial results after U.S. markets close.
  • Managed to get that raise or promotion? Fantastic — now don’t go out there and spend it all immediately. In classic “keeping up with the Joneses” fashion, too many of us see an increase in salary or a sudden windfall (like an inheritance) as an excuse to take our lifestyle up a notch. We buy bigger houses than we need, get the latest gadgets even though ours work just fine,and spring for fancy steak dinners just because we can.

    ​Instead, whenever your financial situation gets a boost, consider the best ways to put that money to work for you. The truly wealthy are those whose money continues to grow and earn them more, even when they’re not actively doing anything with it.

    1. Lifestyle inflation

  • The average American household that carries credit card debt holds a balance of around $15,000. If you’re among those who have a credit card balance, you’ve probably seen the little chart on your monthly statement telling you how much you’ll pay in interest over the next several years if you make only the minimum payment. (If you haven’t, look at it.) The same chart will also compare that to a “suggested” payment that’s slightly higher. 

    ​Our recommendation? Throw everything you can at paying your balances off as fast as possible. And make sure not to take on any additional debt in the future; if you can’t pay for a consumer good out of pocket, don’t finance it.

    2. Credit card debt

  • We don’t demonize student loan debt the way we do credit card debt because we see an education as an investment — and higher education often is the difference between one income bracket and another. Similarly, many people justify taking out a car loan by stating that they need a car to get to work.

    ​That said, debt is still debt, and the longer you take to pay it off, the more interest you’ll pay. Once you’ve freed yourself of credit card debt, paying down your car and student loan balances should be next on your list.

    3. Car loan and student loan debt

  • Whether it’s to handle an unexpected car repair, a sudden illness or a major plumbing problem, you should always have some money set aside to cover unforeseen expenses. Set up a regular monthly transfer from your checking to your savings account to earmark this money before you’re tempted to touch it. If necessary, cut back in another budget category (like eating out or entertainment) to free up the funds to save more.

    ​Putting aside a little each month could prevent you from getting socked with a hefty bill you can’t afford and then need to finance.

    4. No emergency savings

  • No matter your age, you should be adding to your retirement funds — such as your 401(k) or individual retirement account — each month. Just setting aside money sporadically won’t cut it; you need to identify how much you’ll need to live on once you stop working and monitor whether you’re on track to reach that amount.

    ​Here’s a quick-and-dirty rule of thumb: multiply your annual spending by 25. This is the amount you’ll need in your retirement portfolio, if you assume that you’ll withdraw 4 percent per year to live on during your retirement. In other words, you’d need $1 million in your portfolio to live on $40,000 annually. Creating a plan will help you make sure you’re able to retire the way you envision.

    5. No official retirement plan

  • A home is a big investment, and sometimes that investment doesn’t wind up netting you the return you thought it would.

    The biggest culprit is having too large a balance on your mortgage, which detracts from your own personal stake in the current market value for your home. The sooner you pay this amount down, the better your home equity will be.

    ​You also want to be careful when purchasing a new home. Buying in a neighborhood that’s on the downward spiral or buying the most expensive home on the block, likely won’t net you a good return when it’s time to sell. Also take care to stay away from custom renovations (like turning the garage into a recreation room), which could negatively affect your resale value. 

    6. Poor home equity

  • Paying high investment fees eats away at your gains. And since your gains compound over time, this creates a domino effect that can really chip away at your wealth. Take a close look at your investment companies’ fees and shop around to make sure they’re not taking more of your money than they need to be.

    7. High investment fees

  • If you don’t have a long-term investment vision and are simply playing the market, you could seriously undermine your wealth-building potential. Stop paying attention to market fluctuations, media pundits and the stories of your friends and family. Instead, create your own long-term investment strategy that will maximize your overall returns. Resist the urge it play it ultra-conservative (or fall for get-rich-quick schemes) and educate yourself on the best way to make your dollars work for you.

    ​If you’re having trouble making sense of your options or want a second opinion, seek the help of a trusted financial adviser.

    8. Risky investments

  • Based on your experience and seniority level, education and industry, you should have a fairly good idea how much you ought to be making at your job. If you don’t, check out a site like PayScale to get a ballpark figure.

    If you’re not making what you’re worth, you’re doing more than leaving money on the table; you’re also losing all the compound growth and investment returns that money could be generating for you. Invest in yourself with professional development and continuing education, make the case for that raise or promotion, or seek out a company who will value you higher.

    9. Making less than you’re worth

  • 10. Insufficient insurance coverage

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