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Stocks Close Lower, But Leading Stocks Outperform

Stocks closed lower Friday on new tariff threats and a new inflation fear, but leading stocks generally outperformed.

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The Dow Jones industrial average lost 0.3% and the S&P 500 dipped 0.2%. The Nasdaq composite gave up 0.3% as well.

Volume fell from Thursday’s levels, according to unconfirmed figures. Decliners topped advancers by 2-to-1 on the NYSE and by 15-to-13 on the Nasdaq.

Wall Street initially was shaken by the August jobs report. Payrolls rose more than expected and wage growth at a 2.9% annual rate was the highest in nine years. That sparked fears of inflation, and raised expectations that the Federal Reserve will indeed raise interest rates a fourth time this year.

The yield on the 10-year Treasury jumped 6 basis points to 2.94% as investor bet on a rate hike in December. A quarter-point increase is regarded as almost a certainty for this month’s Fed meeting.

Indexes bounced and were higher at midday, but then sold off anew on news that President Trump plans tariffs on $267 billion of Chinese imports, on top of $200 billion already in the works. Indexes closed near session lows.

But the IBD 50 shined, rising 0.9% late Friday in a solid show for the leading stocks. The Innovator IBD 50 ETF (FFTY) rose 1%. Only about half the IBD 50 stocks climbed, but a few made outstanding gains that caused the index to smash the major indexes.

Five Below (FIVE) soared 13% after the discount retailer beat quarterly profit and sales expectations, while management raised its full-year outlook. Palo Alto Networks (PANW) rose 3% after the cybersecurity company also beat expectations. Health Insurance Innovations (HIIQ) climbed nearly 6%. Internet firms Match Group (MTCH), Grubhub (GRUB) and Momo (MOMO) also outperformed.

For the week, the Nasdaq slid 2.5%, its worst week since March. The composite erased nearly all gains from the previous two weeks. The S&P 500 fell 1% and the Dow was nearly flat.

In an optimistic sign, the Nasdaq held above its 50-day moving average. Invesco QQQ Trust (QQQ), the ETF that tracks the Nasdaq 100, got closer to its 50-day line and also held above it.

Utilities and other interest rate-sensitive stocks were among Friday’s weakest. The SPDR Utilities ETF (XLU) slid 1.2%. SPDR Dow Jones REIT ETF (RWR) fell 1.1%.

Retail was one of the day’s the best sectors, as discount and specialty chains performed well.

Sprouts Farmers Market (SFM) broke out of a cup-without-handle base with a 28.39 buy point. Fast food chain Sonic (SONC) topped the 37.54 buy point of a flat base but closed below the entry. Neither stock’s relative strength lines made new highs, a drawback for these breakouts.

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