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The stock market is trading as the economic picture blurs



You are not the only one confused about the economy. Just take a look at the stock market where perplexed investors sent shares during a wild ride in August.

And there could be many more where that came from. Only two previous months of eligible shares remain available.

Shares around the world jumped on Friday to capture another tumultuous week. Investors have been zealously trying to suspend their predictions about whether President Donald Trump's trade war and slowing economies around the world will drag the United States into recession. In the United States, the result was a week where the Dow Jones Industrial Average had four days, where it rose or fell more than 300 points – with an 800-point drop thrown into the mix.

On Friday, the S&P 500 rose 1.4%. The Dow climbed 1.2% and the Nasdaq gained 1.7%. But each index still ended with a third-straight weekly decline.

Shares, bonds and other investments have been growing more and more during the week, with concerns hitting growth on Wednesday, when a fairly reliable warning signal of recession set off in the U.S. fiscal market.

Friday marked the seventh time in the last 10 days that the S&P 500 was up at least 1%, something that has not happened since the end of 2018, the last time investors were worried about a possible recession. At the time, they were concerned about rising interest rates, along with the trade war.

Don't expect volatility to go away anytime soon, analysts say. No one knows when Trump's trade war will find a resolution, or whether all the uncertainty it creates will push enough companies and shopkeepers to endure spending and cause a recession. Some investors are investigating that trade tensions will continue through the election in 2020.

"We are also targeting a difficult season for the market," said Emily Roland, co-chief investment strategist at John Hancock Investment Management. "September and October tend to be the most volatile of the year for markets. We have therefore spoken to investors to look for areas to take risk within a portfolio."

The S&P 500 has lost an average of 1.1% in September over the last 20 years, making it the worst performing month of the year. October's bestselling record is better, but it includes the worst monthly performance in that stretch, a nearly 17% drop in 2008.

But Roland and other professional investors also caution that this turmoil is actually normal for the market when looking at it in a very long-term view. The US stock market has historically experienced such outbreaks of very busy injury days, interwoven between longer periods of calm. Since early 2009, whenever the S&P 500 has fallen by 3% in a day, it has preceded or followed another such fall within a month 70% of the time.

"What was abnormal is the super-low volatility" that investors have enjoyed during much of this bull market, which began in 2009, said Brian Yacktman, portfolio manager of YCG Enhanced fund.

He sees volatility as an opportunity to buy shares at cheaper prices, and he has recently been part of bank stocks that have been troubled by concern that lower interest rates will hurt their profits.

"When you have such volatility, you actually buy the market for sale," said Rob Scheinerman, general manager of AIG Retirement Services. "That's a great thing."

Technology companies and banks have done their utmost to drive Friday's broad rally as investors have recovered some evidence for risky hold. Utility services, which have been one of the safest shelters for investors this month, have remained the market.

The S&P 500 rose 41.08 points, or 1.4%, to 2,888.68. The Dow, which had an 800-point fall earlier in the week, added 306.62 points, or 1.2%, to 25,886.01. The Nasdaq climbed 129.38 points, or 1.7%, to 7,895.99.

Investors favored smaller companies that pushed ahead with the Russell 2000. The index rose 31.99 points, or 2.2%, to 1,493.64.

Even with the most recent turbulent exchange, the S&P 500 is still having a good year. The broad market index rose 15.2% for 2019. Similarly, the Nasdaq is still up 19% for the year.

Long-term bond yields also climbed on Friday. The yield on 10-year treasury rose 1.56% from 1.52% late on Thursday.

The rebound for yields followed a weekly slump, which included a sharp fall Wednesday, which sounded yet another alarm bell for the economy. The yield on a 10-year treasury fell below the yield on the two-year treasury, a rare occurrence and one that has historically suggested a recession may be a year or two away.

Investors hope that the Federal Reserve will continue to cut interest rates to boost economic growth. The central bank lowered interest rates by a fourth point at its last meeting. It was the first time it had lowered rates in a decade.

Benchmark crude oil rose 40 cents to settle at $ 54.87 a barrel. Brent crude oil, the international standard, rose 41 cents to close at $ 58.64 a barrel. Wholesale gasoline rose 2 cents to $ 1.66 per gallon. Heat oil was unchanged at $ 1.81 per gallon. Natural gas fell 3 cents to $ 2.20 per 1,000 cubic feet.

Gold fell $ 7.10 to $ 1,512.50 per ounce, silver fell 9 cents to $ 17.10 per ounce and copper traded at $ 2.59 per pound.

The dollar rose to 106.29 yen from 106.11 yen on Thursday. The euro weakened to $ 1.1093 from $ 1.1107.

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AP Business Writer Damian J. Troise contributed.


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