The US markets closed higher on Friday, posting sharp weekly gains, with a big assist from rally in telecommunication and bank shares, as Wall Street shook off North Korea's latest missile launch. Stocks initially struggled for direction as investors weighed North Korea's decision to fire a missile over Japan for the second time in a month, but soon found firmer footing. The New York Federal Reserve reduced its estimate of US gross domestic product growth for the third quarter and fourth quarter to below 2 percent, based on unexpected falls in industrial output and retail sales in August. The regional central bank's 'Nowcast' model calculated the economy was expanding at an annualized pace of 1.34 percent in the third quarter, slower than 2.06 percent last week. Its GDP estimate for the fourth quarter was lowered to 1.82 percent from 2.62 percent a week earlier.
On the economy front, industrial production plunged in August mainly due to disruptions from Hurricane Harvey. Output sank 0.9% last month. It was the biggest decline since May 2009 when the economy was in recession. This is the first decline in production in seven months. Output in July was revised to a 0.4% gain from the prior estimate of a 0.2% increase. There were across-the-board declines in output in August. Output among manufacturers slipped 0.3%, while production at utilities sank 5.5%. Mining output fell 0.8%. Production of business equipment, consumer goods and construction also declined. Auto production was an outlier, rising 2.2% in August. This partly reversed a 4.2% drop in the prior month. Worries about the auto sector persist as production in the sector is now down 3.6% over the past year. Capacity utilization, meanwhile, sank to 76.1% in August from 76.9% in the prior month.
Meanwhile, US retail sales fell in August for the second time in three months, reflecting fewer car purchases and reluctance by Americans to spend on a variety of consumer goods such as clothes and electronics. Sales at retailers nationwide dropped 0.2% to mark the biggest decline in six months. Sales for July and June were also much weaker than originally reported. The slower pace of retail spending partly reflects the outsized importance on the US auto industry since it accounts for about one-fifth of all sales. In August, sales at auto dealers sank 1.6%. Separately, consumer sentiment fell slightly in September on concerns over the future, even as consumers assessed current conditions to be slightly better. The University of Michigan consumer-sentiment index fell to 95.3 from 96.8 in August.
The Dow Jones Industrial Average added 64.86 points or 0.29 percent to 22,268.34, the Nasdaq gained 19.39 points or 0.30 percent to 6,448.47 and the S&P 500 edged higher by 4.61 points or 0.18 percent to 2,500.23.