Stocks rise as US involvement in Iraq seen as limited

U.S. stocks rose on Friday as investors weighed the implications of a U.S. military strike against insurgents in Iraq, along with a possible lessening of tensions in the Russian-Ukraine crisis.

“Iraq is a tragedy, but the president made clear our engagement is going to be limited. While the markets always sell off immediately in the face of uncertainty, it doesn’t take long to realize this airstrike against ISIS (Islamic State in Iraq and Syria) doesn’t change the geopolitical picture in any significant way,” said David Kelly, chief market strategist at J.P. Morgan Funds.

“We’ve been in a corrective mode over the last two weeks, but I don’t think the geopolitical risks have become noticeably worse, and the earnings season, which should matter the most, has turned out to be good,” said Kelly.

There’s a disconnect for average Americans and Wall Street’s gains, as “it feels like this has been a lousy economy, and the market is up a lot, so people think it must be overvalued, but that is not true. This is the type of economy that helps corporate earnings much more than the individual. It may not feel great, so it’s natural to assume the market is too expensive, but we don’t think it is, based on the numbers,” Kelly said.

The Pentagon’s press secretary said via Twitter on Friday that U.S. military aircraft had struck rebel artillery that was being used against Kurdish forces defending a position near American personnel.

“Does that speak to an escalation of tension, or a resolution in that geopolitical hot spot; there’s an argument to be made for the latter,” Art Hogan, chief market strategist at Wunderlich Securities, said of the U.S. military action in Iraq.

Stock-index futures had risen on a news report signaling Russia might be looking to de-escalate the Ukraine conflict, offsetting declines that came with President Barack Obama’s decision to authorize airstrikes in Iraq.

Geopolitical concerns overtook economic reports, which on Friday included data from the Labor Department that had nonfarm productivity rebounding more than expected in the second quarter, with a drop in labor costs pointing to still-tame wage pressure.

“On balance, economic data continue to be constructive and ignored,” said Hogan at Wunderlich Securities.

Thursday evening, Obama told a press conference he had authorized the U.S. military to make targeted airstrikes to protect American personnel in Iraq. His remarks came as the U.S. began an effort to drop humanitarian aid to Iraqi civilians in the northwest of the country.

DJIA Dow Jones Industrial Average 16438.24
69.97 0.43%
S&P 500 S&P 500 Index 1918.01
8.44 0.44%
NASDAQ Nasdaq Composite Index 4348.50
13.53 0.31%

The CBOE Volatility Index, a measure of investor uncertainty, fell 0.1 percent to 16.64.

After rising as much as 70 points and falling 4, the Dow Jones Industrial Average was lately up 69 points, or 0.4 percent, at 16,437.27, with Home Depot leading blue-gain gains that included 25 of 30 components.

McDonald’s fell after the fast-food giant reported worse-than-expected July sales.

The S&P 500 added 8.83 points, or 0.5 percent, to 1,918.40, with utilities pacing gains that extended to all 10 of the S&P’s main sectors.

The Nasdaq climbed 13.81 points, or 0.3 percent, to 4,348.77.

For every shares falling, more than two rose on the New York Stock Exchange, where 174 million shares traded by 11:10 a.m. Eastern. Composite volume cleared 858 million.

Getty Images A trader works on the floor of the New York Stock Exchange in New York.

Getty Images
A trader works on the floor of the New York Stock Exchange in New York.

The dollar declined against the currencies of major U.S. trading partners; the yield on the benchmark 10-year note fell 3 basis points to 2.384 percent.

On the New York Mercantile Exchange, crude futures turned lower, lately down 2 cents at $97.32 a barrel; gold futures also reversed direction, up 10 cents at $1,312.60 an ounce.

On Thursday, stocks declined, pushing the Dow further into the red for the year, as Wall Street echoed action in European markets amid unease over the crisis in Ukraine.

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