By Corrie Driebusch and Avantika Chilkoti 

U.S. stocks climbed for a second consecutive session Friday but remain on track for modest weekly losses as investors continue to parse signs of slowing economic growth.

Positive developments around trade and reassurances of extra stimulus from central bakers buoyed markets, which were rattled earlier this week after weak data out of Germany and China exacerbated fears of a potential recession. Concerns about weakening corporate earnings and uncertainty over the pace of the Federal Reserve's potential interest-rate cuts have added to the unease.

Many investors have rushed to cut their exposure to riskier stocks and instead sought the relative safety of U.S. government bonds, which sent the yield on the 30-year Treasury bond to a record low this week.

The Dow Jones Industrial Average is on track to end the week down about 1.5%, despite Friday's rally of about 300 points, or 1.2%. The blue-chip index suffered its steepest loss of the year Wednesday following the disappointing overseas data and ominous signals from the bond market.

Sentiment appeared to shift Thursday after retail sales data indicated American consumer spending had remained strong in the face of global headwinds, countering weakness in the manufacturing space.

The ever-shifting signals have left traders scrambling to keep up.

"The volatility makes a difficult investing environment," said Justin Wiggs, managing director of equity trading at Stifel Nicolaus. "It seems to be equal parts people feeling they need to be in motion and people feeling paralyzed."

If Friday's move holds, the blue-chip index will have closed up or down at least 1% in all but one trading session this week.

Many traders and analysts said the next big catalyst for the stock and bond market will likely come next week when Federal Reserve Chairman Jerome Powell is scheduled to speak at the central bank's annual retreat in Jackson Hole, Wyo. Investors are eagerly awaiting any signals from Mr. Powell on how the recent escalation in trade tensions between the U.S. and China could play into the Fed's policy and whether it could mean more rate cuts in the coming months.

The Fed cut short-term interest rates in late July, a move stock investors cheered, but the latest batch of volatility has many traders and analysts calling for additional intervention by the Fed as Treasury yields have fallen precipitously.

The yield on 10-year Treasurys rose to 1.545% Friday, from 1.534% a day earlier. The 30-year bond slipped below 2% again and was briefly as low as 1.979%, according to Tradeweb.

Earlier this week, so many investors piled into long-term U.S. government debt that the yield on the 10-year Treasury note briefly fell below two-year yields for the first time since 2007, an inversion that is viewed by many as a signal that a recession could be on the horizon.

Jose Marques of quantitative hedge fund Inferent Capital LLC said he believes the recent volatility is part of a larger shift in how markets trade, leaving it more difficult for investors to make money. His fund invests in about 3,000 stocks at a time--algorithms, rather than humans, drive the bets.

"What's changing every day is the relationships deep inside that are generally getting faster and less predictable," he said. "You can call that market efficiency, but it does make it harder to extract trading profits from markets."

While data reveal stalling economies in Europe and China, in the U.S. there are more positive signs. Consumer spending, which accounts for more than two-thirds of the U.S. economic output, appears to be healthy, with retail sales rising in July, the Commerce Department said Thursday. New-home construction in the U.S. fell in July, but residential building permits notched their largest increase in roughly two years, according to data released Friday.

Investors will be watching next week for any signs of progress in the U.S.-China trade talks. President Trump said Thursday that he plans to have a call with Chinese President Xi Jinping soon and face-face negotiations on a possible trade deal will resume next month.

Despite the volatile week, major indexes in Europe and Asia finished Friday higher.

The Stoxx Europe 600 rose 1.2%, led by gains in its technology and utilities sectors. A top official at the European Central Bank said Thursday that it will announce a package of stimulus measures at its next policy meeting in September that should exceed investors' expectations.

In Asia, Hong Kong's Hang Seng gained 0.9%, while stocks in Shanghai rose 0.3%. China's State Council pledged Friday to cut financing costs for businesses and vowed better credit support for companies with high creditworthiness

In commodities markets, U.S. crude rose 0.8%. Oil prices have been volatile in recent sessions as tensions in the Strait of Hormuz ratcheted up. This week, Gibraltar released an Iranian tanker impounded in July, opening the door for Tehran to free a British-flagged vessel it seized. Fears about a global slowdown have also pressured oil as slowing economies can lead to weaker consumption.

Rachael Levy and Anna Isaac contributed to this article.

Write to Corrie Driebusch at corrie.driebusch@wsj.com and Avantika Chilkoti at Avantika.Chilkoti@wsj.com

(END) Dow Jones Newswires

August 16, 2019 15:05 ET (19:05 GMT)