U.S. stocks ticked higher Friday as investors watched the progress of a health bill seen as a key test of the new administration's ability to push through business friendly policies.
The Dow Jones Industrial Average rose 24 points, or 0.1%, to 20681 in recent trading. The S&P 500 climbed 0.2%, while the Nasdaq Composite gained 0.5%.
A vote to replace the Affordable Care Act is now expected to happen Friday after a one-day postponement. White House budget director Mick Mulvaney said if the bill fails, President Donald Trump will move on to other priorities.
Many investors view the bill as a barometer of the Trump administration's ability to implement its wider policy agenda, including tax reform and infrastructure spending plans that helped lift U.S. stocks to record highs earlier this year.
"This is an inflection point," said Philip Blancato , chief executive at Ladenburg Thalmann Asset Management. For markets, "this is the first real test of the Trump presidency, to see if it's really a presidency that can affect change, he said. "The concern is if it doesn't get passed, none of his legislative agenda will go through."
Modest cracks in the so-called Trump-trade, a bet that corporate friendly policies such as lower taxes and loosened regulations will help promote higher equities and government bond yields, emerged earlier this week as investors headed to the end of the first quarter. Major U.S. stock indexes posted their biggest daily decline in months on Tuesday, while redemptions from U.S. equity funds jumped to a 38-week high, according to fund-tracker EPFR Global.
The Russell 2000 small-stock index, seen as a key beneficiary of the new administration's policies, wiped out nearly all its gains for the year, while S&P 500 financials are on track to end the week roughly 3.6% lower. Utilities companies, which are less sensitive to the economic cycle, are one of only two S&P 500 sector on track for weekly gains.
To be sure, recent declines have been relatively muted in absolute terms, with the S&P 500 on track to end the week just 1.1% lower. Part of the reason for this is fund managers continue to hold elevated levels of cash, which can be deployed during any dip.
The latest survey of global fund managers from Bank of America Merrill Lynch found investors are holding 4.8% of their portfolios in cash. That's down from 4.9% in February, but is still higher than the 10-year average of 4.5%.
"Fund managers aren't overly exposed to equity markets, so any sort of pullback in stocks is going to be met with buying," said John Brady , managing director at futures brokerage R.J. O'Brien .
Many investors also still believe easy monetary policy and a strengthening global economy will provide a floor for stock markets even at high valuations. Surveys of purchasing managers showed Friday that the eurozone economy grew at its fastest pace in six years in the first three months of 2017, echoing upbeat economic data in the U.S.
"In the short term, I think the global economy has some momentum," said Anthony Doyle , investment director at M&GInvestments.
The Stoxx Europe 600 slipped 0.3% despite the upbeat reading on the eurozone economy, with shares of insurers and oil-and-gas companies leading declines.
Earlier, markets in the Asia-Pacific region mostly moved higher, led by the financial sector.
Yields on 10-year U.S. Treasurys were little changed at 2.417% Friday from 2.418% Thursday, while 10-year German bund yields slipped to 0.411% from 0.429%. Yields move inversely to prices.
In commodities, U.S.-traded crude oil edged up 0.3% to $47.81 a barrel, on track to rise for the first time in five sessions. Gold fell 0.2% to $1,244.20 an ounce.
