S&P 500 turns flat after Fitch warning; Merck boosts Dow

The S&P 500 pared early gains on Friday after Fitch warned that political wrangling over the US debt limit could hurt the country's credit rating, while drugmaker Merck supported the Dow on marking progress in developing an oral COVID-19 drug.

Fitch said debt limit "brinksmanship", referring to extended bipartisan talks over raising the spending cap, could put pressure on the United States' 'AAA' rating.

President Joe Biden signed a measure to continue funding the government through Dec. 3, although congressional Democrats and Republicans continued brawling over raising the debt ceiling beyond $28.4 trillion to avert a US credit default

"It's unfortunate when Congress uses this as a negotiating tactic, it's a bad scenario overall," said Randy Frederick, managing director of trading and derivatives for Schwab Center for Financial Research.

"Eventually, foreign creditors might be unwilling to buy US debt and if that happens, rates are going to go sharply higher and if rates shot up because people were unwilling to buy treasuries that would have a very negative impact on the market."

Wall Street rises, but tracks steep monthly losses

Shares of Merck & Co Inc jumped 8% and were the top boost to the Dow after the company's experimental oral drug for COVID-19, molnupiravir, reduced by around 50% the chance of hospitalization or death for patients at risk of severe disease in a study.

"The market is viewing this as a very positive development as it gave people confidence that the reopening is not going to get derailed despite breakthrough cases with vaccines," said Thomas Hayes, managing member at Great Hill Capital LLC in New York.

Six of the 11 major S&P sectors advanced in early trading, with economy-sensitive energy, industrials and materials rising the most.

Cruiseliners and jumped more than 3%, while the S&P 1500 Airlines sub-index added 4.2% on hopes of a faster rebound in travel demand.

Wall Street ended sharply lower on Thursday and the S&P 500 posted its worst month since the onset of the global health crisis, following a tumultuous month and quarter wrecked by concerns over COVID-19, inflation fears and budget wrangling in Washington.

Data showed US consumer spending increased more than expected in August, while the personal consumption expenditure index, a preferred inflation gauge for the Federal Reserve, maintained its upward trend through the month.

At 9:58 a.m. ET, the Dow Jones Industrial Average was up 122.89 points, or 0.36%, at 33,966.81, the S&P 500 was down 0.59 points, or 0.01%, at 4,306.95, and the Nasdaq Composite was down 53.71 points, or 0.37%, at 14,394.88.

Cryptocurrency-linked stocks rose as bitcoin rallied after Fed Chair Jerome Powell said the United States had no plans to ban cryptocurrencies.

Coty Inc gained 5.7% after agreed to sell ~9% stake in professional beauty business Wella to KKR & Co Inc.

Advancing issues outnumbered decliners by a 1.49-to-1 ratio on the NYSE and by a 1.17-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and five new lows, while the Nasdaq recorded 20 new highs and 62 new lows.