Dow climbs in early Friday action as Wall Street attempts to cap tumultuous trading week with an upswing


Stock benchmarks on Friday rose modestly higher as investors looked to close out a volatile, holiday-shortened week that has the tech-heavy Nasdaq Composite on track for its biggest weekly loss since the height of the pandemic-induced market selloff in March.

How are major benchmarks trading?

The Dow Jones Industrial Average
DJIA,
+0.19%

rose 117 points, or 0.4%, to around 27,650, while the S&P 500
SPX,
+0.07%

gained 14 points, or 0.4%, to trade at 3,353. The Nasdaq Composite Index
COMP,
-0.09%

climbed 48 points, or 0.5%, at 10,952. But all three benchmarks were trading off their intraday peak near the open, highlighting the week’s choppy action.

The Dow on Thursday fell 405.89 points, or 1.5%, to close at 27,534.58, while the S&P 500 ended with a loss of 59.77 points, or 1.8%, at 3,339.19. The Nasdaq Composite fell 221.97 points, or 2%, to finish at 10,919.59. Through Thursday, the Dow was down 2.1% for the week, while the S&P 500 was off 2.6% and the Nasdaq was 3.5% lower; markets were closed Monday for Labor Day.

What’s driving the market?

A decline in the S&P 500 index for the week would mark the benchmark’s first back-to-back weekly drop since May.

“While monetary policy is set to remain supportive for several more quarters, valuations are high across assets and volatility is resurfacing,” said Elia Lattuga, co-head of strategy research at UniCredit Bank, in a note. “The breadth of the rally is still limited and the recovery uneven—hence developments in the economic outlook and political risks represent significant threats to risk appetite.”

Stocks were unable to follow through Thursday on a Wednesday bounce that saw equities recover somewhat from a three-day, tech-led rout that pushed the Nasdaq into correction territory, falling more than 10% from its record close set last week.

Weakness on Thursday was partly tied to the inability of U.S. politicians to agree on a new coronavirus rescue package after Democrats blocked a Republican bill on the Senate floor, leaving the way forward unclear, analysts said.

Meanwhile, investors have fretted that the sharp rally that took stocks from their March pandemic lows to new all-time highs had left valuations significantly stretched for the large-cap, tech-related stocks that had led the rally this year. Among those highfliers, shares of Apple Inc.
AAPL,
-0.85%

 and Netflix Inc.
NFLX,
+1.22%

 were on track for weekly declines of more than 6%, while Facebook Inc.
FB,
-0.57%

 is off more than 5%.

In U.S. economic news, the consumer-price index for August rose 0.4% last month, beating average economists’ estimates for a rise of 0.3% but falling below the past two months at 0.6%. On a year-over-year basis, the CPI increased 1.3% after gaining 1.0% in July, the Labor Department said on Friday

Looking ahead, Federal budget figures for August are due at 2 p.m. Eastern.

Which companies are in focus?
What are other markets doing?

The yield on the 10-year Treasury note
TMUBMUSD10Y,
0.675%

 rose 0.4 basis point to 0.687%. Bond prices move inversely to yields.

The ICE U.S. Dollar Index
DXY,
-0.12%
,
which tracks the performance of the greenback against its major rivals, fell 0.1%.

Gold futures
GCZ20,
-0.08%

were off 0.3% at $1,958 an ounce, threatening to snap a three-day winning streak. The U.S. crude oil benchmark
CL.1,
-0.10%

 fell 16 cents, or 0.5%, to $37.13 a barrel.

The Stoxx Europe 600 index
SXXP,
-0.11%

 was edging 0.1% lower, while the U.K.’s benchmark FTSE
UKX,
-0.26%

rose 0.2%. In Asia, Hong Kong’s Hang Seng Index
HSI,
+0.78%

and the Shanghai Composite Index
SHCOMP,
+0.78%

 both rose 0.8%, while Japan’s Nikkei
NIK,
+0.73%

rose 0.7%.



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The two things that are most likely wrecking your retirement savings


If you earn a decent income but have trouble saving, the culprits could be the roof over your head and the car in your driveway.

Retirement savers who contribute more to their 401(k)s often spend less on housing and transportation than their peers, according to a study by the Employee Benefit Research Institute and J.P. Morgan Asset Management.

Better savers also spend less on food and drink, but housing and transportation are bigger expenses that tend to be less flexible. Once you commit to a place to live and a car payment, you’re typically stuck with those expenses for a while.

“It may be decisions that you’re making as you are building your life that will ultimately crowd out saving for retirement,” says Katherine Roy, chief retirement strategist for J.P. Morgan Asset Management.

The researchers divided 10,000 households into three groups: the 25% who contributed the least to their retirement plans, the 25% who contributed the most, and the “middle savers” whose contributions landed them in the middle 50%. High savers, not surprisingly, had higher incomes than the other two groups. Middle and low savers had similar incomes, but middle savers contributed about 5% at the start of their careers while the low savers contributed about 2%.

See: What if I’m in my 40s and don’t have a retirement fund?

That 3 percentage-point difference in contributions is largely attributable to the lower savers spending more on housing, transportation, and food and beverage, the researchers found. By retirement age, middle savers had accumulated savings equal to twice their salaries. Low savers had accumulated about half as much.

A ‘beater’ truck and a fat 401(k)

Driving older vehicles and owning a modest home are the top two sacrifices cited in a study of Principal Financial Group customers ages 20 to 54 who contribute big chunks of their income to retirement accounts.

One of those savers is Erryn Ross, 30, of Tigard, Oregon. For several years after college, the accounts receivable coordinator lived at home and drove a “beater” truck, a hand-me-down from his dad. By the time he was ready to replace the truck, he had saved enough to pay cash for a new one while also maxing out his 401(k) contribution.

Ross credits his mother — who drives a 2002 Honda Accord, previously owned by her father — with getting him started.

“She said, ‘OK, you can either pay me $1,000 for rent, or you can put $1,000 in index funds every month,’” Ross says. He put the money into his retirement account.

Ross recently bought a house with his fiancée, and they chose a home that cost about half of what their lender said they could afford. They figured out how much they felt comfortable spending each month and based their purchase on that amount.

“I don’t really need a million-dollar home here,” Ross says. “I just need something that’s going to house the family.”

It’s not all about choice

Both studies have their limitations. Perhaps the biggest one is that the researchers studied only people who had access to workplace retirement plans. Before the pandemic, 55 million working Americans lacked such access, according to Georgetown University Center for Retirement Initiatives. Access makes a huge difference: AARP found that people are 15 times more likely to save for retirement if they have access to a payroll deduction plan at work.

Also see: Has COVID-19 stopped Americans from chasing early retirement? Not exactly

The researchers also didn’t factor in the cost of living, which varies widely across the country. Living expenses are 46% higher in San Francisco and 86% higher in Manhattan than in Portland, Oregon, for example.

People’s personal costs of living matter hugely as well. Someone with health problems and lousy insurance likely will have more of their income eaten up by medical bills than someone in excellent health who has good coverage. The number of people you have to support — children, elderly parents, for example — affects how much you can save. People with student loan debt have less discretionary income than those whose parents paid for college. And so on.

Income matters, of course. Some people save on small incomes, while others don’t on large ones. But the more money you make, the easier it is to save.

Also read: The pros and cons of buying a certified used car

In other words, any number of factors — such as, say, losing a job during a pandemic — can affect someone’s ability to save.

When you do have choice, though, choose wisely. The decisions you make about the big expenses now can have a huge effect on what you can spend in retirement.

“Often in our financial wellness programs, we lead with, ‘You need to have a budget’ or ‘Don’t have that Starbucks
SBUX,
-1.14%

  cup of coffee,’” Roy says. “I think it’s more fundamental than that.”

More from NerdWallet:



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Corporate bond issuance off to a bang in September


Corporate borrowing is off to the races.


Getty Images

Companies wasted no time going back to the borrowing trough after the long Labor Day weekend.

U.S. investment-grade companies already borrowed $46.7 billion in the bond market this month through Wednesday, a single day that accounted for $21.3 billion of the total, according to BofA Global Research.

Notable among the week’s deluge was a debut $1 billion green bond issued by JP Morgan Chase & Co.
JPM,
-1.03%
,
putting it alongside other major corporations from Google parent Alphabet
GOOG,
-1.60%

GOOGL,
-1.36%

to Visa Inc.
V,
-1.23%
,
which in recent weeks have raced to borrow with do-good purposes.

September often can be a busy month for corporate borrowing, as companies focus on the remaining weeks left in the year to lock in optimal financing — meaning before Thanksgiving, when the typical year-end lull begins to take hold.

Here’s a look at how September bond issuance stacked up over the past five years:

The pandemic has made this year anything but typical, including with a record $1.5 trillion already borrowed by investment-grade companies so far in 2020 to help fund their operations through the year’s end.

Many highly rated businesses borrowed fresh mounds of debt at lower rates than ever before, even though they are now carrying record levels of leverage.

Read: U.S. corporate debt soars to record $10.5 trillion

However, with the Federal Reserve’s unprecedented pandemic support, there’s little reason to think big businesses have had enough of today’s ultra-low borrowing rates.

“It’s a very busy September,” said Wendy Wyatt, a portfolio manager at DuPont Capital, of investment-grade bond supply. While she doesn’t expect to see the same eye-popping borrowing boom as in March, April and May, when companies were panic-borrowing, Wyatt has been encouraged by the recent trend where bond issuance has been used by more companies to kick their debts down the road or to repay near-term maturities.

“It’s not hideous. It’s a smart business decision,” she said of the debt replacement or reduction strategy, even through she’s also keeping an eye on companies that look to take on more debt to fund mergers and acquisitions.

“M&A has picked up and you’ve got to be cautious about that,” she said.

Related: Coronavirus slashes deal-making globally: What to expect next

To be sure, some of the big winners of the pandemic debt boom have been investment banks hired to arrange the funding.

Revenue at investment banks jumped 32% to $101.6 billion in the year’s first half from a year prior, its highest level since the first half of 2012, according to Coalition, a global analytics company.

What’s more, Coalition expects the year’s swift uptick in investment banking business, particularly in fixed-income, currencies and commodities, to combine with further head-count reductions at banks and produce an 12% return on equity for institutions it tracks in its index.

That would mark a significant reversal of a trend where ROE for banks in the index have declined each year since 2016, when it hit 9.5%.



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Gold prices gain as euro strength pressures the dollar


Gold futures climbed on Thursday, poised to score a third straight session gain, as strength in the euro in the wake of the European Central Bank’s decision to leave its policy unchanged pressured the U.S. dollar.

The European Central Bank left its policy unchanged at minus 0.5% and its refinancing rate at 0%, while reaffirming it plans to leave rates at present or lower levels until inflation rises to converge with its target at 2%.

In a news conference, ECB President Christine Lagarde said the Governing Council “extensively” discussed the recent strength of the shared currency, but reiterated that the bank doesn’t target the exchange rate. A Bloomberg report, meanwhile, said that members of the council had agreed to not overreact to euro strength.

“The ECB has confirmed that there is no further need for additional help,” said Naeem Aslam, chief market analyst at AvaTrade, in a market update. “For traders, the ECB’s confidence in the Eurozone’s economy is a good thing and this is the reason that we have seen the EUR/USD moving higher.”

In Thursday trading, the euro
EURUSD,
+0.80%

 traded at up 0.8% at $1.19, but that helped pull the ICE U.S. Dollar Index
DXY,
-0.45%

 down by 0.5% to 92.802. A weaker dollar can provide support for assets priced in greenback, making them less expensive to overseas buyers.

December gold
GCZ20,
+0.87%

GC00,
+0.87%

was up $18.60, or 1%, at $1,973.50 an ounce, following gains in each of the last two sessions.

December silver
SIZ20,
+1.98%

SI00,
+1.98%

traded 54 cents, or 2%, higher at $27.62 an ounce after climbing 0.3% in the previous session.

In U.S. economic news Thursday, the number of American who applied for unemployment benefits through state and federal programs in the week ended Sept. 5 was unchanged at a seasonally adjusted 884,000, the Labor Department said. Still, continuing jobless claims, the number of people already receiving benefits rose by 93,000 to a seasonally adjusted 13.39 million in the seven days ended Aug. 29.

“The mixed bag of economic data confirms that there is gradual recovery for the U.S. economy,” said Aslam. “However, things are not improving and this is the reason that we are seeing improvement in the gold price. It is likely that the bottom is in for the gold price and it is likely to continue to move higher.”

Other metals traded on Comex also moved higher Thursday. December copper
HGZ20,
+0.04%

traded at $3.0545 a pound, up 0.1%. October platinum
PLV20,
+1.89%

 added 2% to $943.50 an ounce and December palladium
PAZ20,
+1.19%

 climbed 1% to $2,342 an ounce.



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JP Morgan enters green bond push with $1 billion debut debt deal


The San Francisco skyline is obscured in orange haze Wednesday.


AFP/Getty Images

JP Morgan Chase & Co. entered the green-bond world on Wednesday, offloading the bank’s first set of bonds specifically to fund projects with a sustainability bent.

While the banking giant has arranged debt with an environmental or social-good purpose for its clients and other companies, this was JP Morgan’s first $1 billion foray into issuing such bonds on its own behalf.

Many investors welcomed the move, not only because of the weight JP Morgan
JPM,
+0.95%

carries in the market as the nation’s biggest U.S. bank by assets, but also because of a growing acceptance within the U.S. that a climate crisis threatens both environmental and financial instability.

Read: CFTC’s groundbreaking climate-change report sounds a bipartisan alarm on costly risks for U.S. financial system

JP Morgan’s bond deal hit as wildfires raged along the West Coast, with smoke from fires shrouding the San Francisco Bay Area on Wednesday in an eerie orange haze and underscoring how climate change threatens to make extreme fire events, power outages and forced evacuations the norm.

“The more the larger players come along, the larger the scale to move things along faster,” said Steve Liberatore, Nuveen’s lead portfolio manager for environmental, social and governance (ESG) criteria and impact investments.

But Liberatore also stressed that a key part of tackling the unfolding “climate disaster” is to mitigate it in an “economically beneficial way for the average person.”

That can mean achieving a lower cost of capital for renewable energy projects than what’s available for funding fossil fuels.

To that end, JP Morgan was able to pull in pricing Wednesday amid high investor demand, clearing the bonds at a spread of 48 basis points over Treasurys BX:TMUBMUSD10Y, after they initially were floated in the range of 65 basis points.

A bond spread is the level of compensation investors get paid above a risk-free benchmark to act as a creditor, with lower spreads often indicating high demand or a lower expectation of default.

“Generally, green bonds yield less, meaning the cost of financing is lower,” said Pri de Silva, senior corporate credit analysts at Aware Asset Management, adding that JP Morgan priced similar bonds in May that were trading on Wednesday closer to 58 basis points over Treasurys.

“From a funding perspective, I’d say there was a 10-basis-point advantage,” de Silva said, even though he noted the “sunk costs” involved in setting up the new green issuance platform, including providing the “belts and suspenders” to ensure there’s a process in place to track that only eligible projects are funded.

To that end, JP Morgan said proceeds from the debut green bond would finance a range of projects from green buildings to renewable energy, in a public filing.

Notably, the bank also listed areas that will be excluded from the funding from bond proceeds, including coal, oil, gas and nuclear energy projects, as well as activities that involve modern slavery, child labor and human rights exploitation.

Amid an overall corporate debt boom, the second quarter also saw a record $99.9 billion of “sustainability bonds” issued globally, according to Moody’s Investors Service, a category that encompasses green, social and sustainable bonds.

JP Morgan’s debut follows on the heels of Citigroup
C,
+0.70%

and Bank of America
BAC,
+0.11%
,
which issued green and social-good bonds earlier this year.

See: Bank of America sold a first-of-a-kind Covid-19 bond

“Banks are in a unique position to issue green bonds as they are interrelated with the broader economy,” said Brian Ellis, portfolio manager, Calvert Green Bond Fund.

“From an investor’s perspective, growth in green bond issuance provides increased opportunities for portfolio and project diversification, but also the ability to be more selective because there’s a larger group to choose from.”

JP Morgan declined to comment.



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