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Dow posts another week of gains despite Apple's worst week in more than a year

  • Health care stocks climbed more than half a percent from session lows to attempt slight gains in afternoon trade after Sen. John McCain withdrew support for the GOP health care bill.
  • Apple shares continued to drag on markets, having dropped 5.5 percent since Monday. Shares of the iPhone maker had their worst week since April 2016.

U.S. stocks closed narrowly mixed Friday as health care stocks recovered most of their losses. The Dow closed out its second consecutive week of gains, up 0.4 percent on the week.

Health care stocks, which were one of the worst performers in the S&P 500 earlier in the day, climbed more than half a percent from session lows to close up 0.08 percent. Top gainers in the health care sector included Medicaid insurer Centene and hospital operators.

The move in biotech and pharmaceutical stocks came after Sen. John McCain, R-Ariz., on Friday said he "cannot in good conscience vote for the Graham Cassidy proposal.

McCain is one of four Republican senators who are undecided on the GOP healthcare overhaul, and his opposition dealt the bill's chances a significant blow.

The Dow Jones industrial average moved off earlier lows, closing down 9.64 points to settle at 22,349.59, with Apple continuing to add to its weekly decline and UnitedHealth leading the decliners. Shares of the iPhone maker had their worst week since April 2016 on the heels of the release of several new products, which launched in stores Friday. The stock remains 31 percent higher for the year.

The S&P 500 closed 0.06 percent higher to finish at 2,502.22, with health care and energy moving higher. Telecommunications led gainers, with news of a potential merger between Sprint and T-Mobile, giving analysts reason to believe the combined company reduces competition among major providers. Verizon shares gained more than 2 percent on the day.

Energy was the second best performing sector on the day.

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"It looks like the money's switching back over to energy. Financials have recovered a little bit as bonds have softened," said JJ Kinahan, chief market strategist at TD Ameritrade, referring to financial stocks parring earlier losses. He also highlighted Apple's persistent burden on markets, though said he's not ready to "sound the alarm bells."

"If you look at Apple, the one thing that I think people are starting to question is the sort of the first crack in FANG. They've had an incredible run," he said.

The Nasdaq composite staged a comeback in afternoon trade to close up 0.07 percent higher as health care gathered steam. The index closed at 6,426.92.

The Russell 2000 gained 0.49 percent to set a new record close.

The Senate's Graham-Cassidy bill would have set up a block-grant system to allot money to the states. A majority of state governments would take a multibillion-dollar hit from the proposal, according to an analysis from the Kaiser Family Foundation.

"In general, the fact is that this last-ditch effort to pass the health care bill was not baked in," said Art Hogan, chief market strategist at Wunderlich Securities. "There's just too much of a groundswell against it."

Geopolitics continued to put pressure on markets Friday. North Korean Minister of Foreign Affairs Ri Yong Ho said Thursday that the country may consider testing a hydrogen bomb in the Pacific Ocean. If successfully conducted, the test would be North Korea's first nuclear test beyond its borders.

"The path of least resistance is probably to lighten up today because of that. From both sides the rhetoric is rising," said Hogan. "As hard as that is to put number to it certainly doesn't give investors a sense of security. And I think that's probably a big focus for today."

Rhetoric between the United States and North Korea escalated this week as North Korean leader Kim Jong Un criticized U.S. President Donald Trump, calling the president's United Nations address earlier this week "unprecedented rude nonsense."

Despite the political sparring, the global market reaction was subdued. The Stoxx Europe 600 index rose 0.09 percent after falling earlier, while Asian markets closed less than 1 percent lower. Hong Kong's Hang Seng fell 0.8 percent, the South Korean the Kospi fell 0.7 percent, and the Japanese Nikkei 225 fell 0.25 percent.

Traders work on the floor of the New York Stock Exchange
Andrew Renneisen | Getty Images
Traders work on the floor of the New York Stock Exchange

Safe havens got a boost Friday. The Japanese yen gained 0.33 percent and the Swiss franc gained 0.06 percent against the dollar while gold futures climbed more than 0.3 percent. The dollar index continued to shed gains from earlier this week, down 0.14 percent.

The yield on the 10-year Treasury note fell slightly Friday to 2.259 percent after posting a strong rebound in recent weeks. Since lows around 2.02 percent two weeks ago, the yield on the 10-year has added more than 23 basis points over the period, notching further gains after the Fed announcement Wednesday.

The geopolitical tensions eclipsed investor attention to end the week after the Federal Reserve indicated Wednesday that a final rate hike in December remains likely, despite recent weakness in inflation data.

Inflation measures have remained largely unimpressive recently, keeping investors skeptical of an additional hike this year. The core personal consumption expenditures (PCE) price index, the Fed's preferred inflation measure, increased 1.4 percent in the 12 months through July. That was the smallest year-on-year increase since December 2015.

Looking ahead to next week, all eyes will be fixed on the PCE's latest reading said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company. "Anything that gives us a hint of what inflation looks like. That's the big data point," he said. "Each and every central bank around the globe is talking about tapering or ending quantitative easing."

US 10-year T-note yield vs dollar index 3-day chart

Source: FactSet