U.S. stocks end higher after Yellen comments, bank earnings

U.S. stocks ended slightly higher on Friday, finishing near lows of the session to turn in a second losing week in a row, after a trio of quarterly bank results topped analyst estimates and Federal Reserve Chairwoman Janet Yellen said there may be benefits to running the economy with a tight labor market.

After a brief spike, stocks returned to levels seen just before Yellen’s speech and remained there until the near the end of the trading session, when stocks pared gains and the S&P 500 and the Nasdaq flirted with slipping into negative territory.

The Dow Jones Industrial Average closed up 39.44 points, or 0.2%, at 18,138.38, for a 0.6% loss on the week. Goldman Sachs Group Inc. rose 1.9% and was the top performer on the Dow.

The S&P 500 index advanced 0.43 points to finish at 2,132.98, for a 1% decline on the week. On Friday, the financials and tech and sectors led gainers.

The Nasdaq Composite index finished up 0.83 points at 5,214.16, for a 1.5% decline on the week.

In a speech in Boston Friday, Yellen said it might be wise to run a “high pressure” economy, one with a tight labor market, to reverse the negative effects of the Great Recession.

Yellen is affirming the dovish tilt seen in the recently released minutes of September’s Fed policy meeting, said Karyn Cavanaugh, senior market strategist at Voya Financial.

“These low rates are kind of silly, but the Fed is between a rock and a hard place,” Cavanaugh said. “It seems that she is OK to let the economy run a little hot before raising rates.”

The S&P 500’s financial sector rose 0.5% and was the biggest gainer among its 11 sectors on the day.

J.P. Morgan Chase & Co. dipped 0.3% after both its earnings and revenue topped analyst forecasts, though the results were still down from the prior year. Similar results were seen at Citigroup Inc. which closed up 0.3% after its quarterly report.

Wells Fargo & Co. shares closed down 0.1%. While its results were ahead of expectations, questions continue to swirl following its sales-tactics scandal that led to the departure of the company’s CEO John Stumpf earlier this week.

All three stocks were trading off their highs of the session; J.P. Morgan had previously traded up more than 1%.

“Market sentiment has generally been negative for a while, so these bank earnings were a bit of a relief,” said Eric Green, senior portfolio manager and director of research at Penn Capital Management. “The headline numbers looked good, and the internal numbers also looked good. That should help the financial sector, which should in turn help the overall market.”

In other data released on Friday, a read on consumer sentiment hit its second-lowest level of the past two years in early October.

A bullish read on retail sales also lifted sentiment, though major indexes remained on track for their second-straight weekly decline. That, however, did little for shares of Kohl’s Corp. and Macy’s Inc. which were both closed down more than 3%.

Other markets: Oil futures settled down 0.2% at $50.35 a barrel on Friday, but finished up higher for a fourth straight week. Gold futures GCZ6, -0.47% settled down 0.2% at $1,255.50 an ounce, and a key dollar index rose 0.4%. European stocks shot up, while Asian markets mostly closed with gains.

Stocks to watch: Amazon.com Inc. shares retreated 0.8%, away from their all-time highs as short interest on the stock rose to about $5.3 billion this week.

HP Inc. shares fell 4.4% after the Silicon Valley icon disclosed a cautious forecast, along with plans to cut 3,000 to 4,000 employees.

Salesforce.com Inc. shares jumped 5.2% following reports that the company has no more interest in buying Twitter Inc. TWTR, -5.12% Shares of Twitter closed down 5.2%.

Source: MarketWatch