Stocks are little changed, but S&P 500 heads for 5-week winning streak

VIDEO2:0202:02Here's what's behind the market rallySquawk on the Street

Stocks hovered around the flatline on Friday but remained on track for solid weekly gains after trade optimism sparked a massive rotation out of bonds and lifted equities to record levels.

The Dow Jones Industrial Average traded 38 points lower, or 0.1%. The S&P 500 slid 0.1% while the Nasdaq Composite climbed 0.3%.

Disney was among the best-performing stocks on Wall Street after the company released its latest quarterly figures. Health care was the best-performing sector in the S&P 500, gaining 0.4%.

The major averages were poised to extend their weekly winning streaks despite Friday's muted performance amid an improving tone around global trade.Traders react after the closing bell at the New York Stock Exchange (NYSE) on August 5, 2019 at Wall Street in New York City.Johannes Eisele | AFP | Getty Images

The Dow is up 1.1% week to date. The S&P 500 and Nasdaq Composite are up 0.6% and 0.8%, respectively, for the week. It would be the third straight week of gains for the Dow while the S&P 500 headed for its fifth straight weekly gain. The Nasdaq was on pace for a six-week winning streak.

A spokesperson for the Chinese Commerce Ministry said Thursday that China and the U.S. had agreed to cancel existing tariffs in phases. A U.S. official also reportedly said both sides agreed to roll back the levies in tranches.

"The trade narrative seems to be inching closer to some form of a 'phase 1 agreement' based on the recent flow of headlines," said Michael Schumacher, global head of rate strategy at Wells Fargo Securities, in a note. "We have all seen this movie before, so we are not ready to call it a done deal."

Meanwhile, Jean-Claude Juncker, president of the European Commission, said there "won't be any auto tariffs" from the U.S. on Europe next week. President Donald Trump has until Nov. 13 to decide whether he will pursue with car tariffs on the EU.

The risk-on sentiment and improving tone around trade took a big bite out bonds. The U.S. 10-year Treasury yield jumped more than 15 basis points at one point on Thursday, its biggest upward move since the 2016 election. The 10-year rate hovered around 1.92% on Friday after starting the week near 1.75%.

Sentiment was also boosted this week by corporate earnings results that have generally beaten expectations. Of the 425 S&P 500 companies that have reported thus far, 74% have beaten estimates, according to FactSet.

Most recently, Disney posted better-than-forecast quarterly numbers, sending the stock up about 4%. Disney's revenues for its media and networks segment topped a FactSet estimate, while sales for the company's parks, studio entertainment and direct-to-consumer businesses also beat expectations. The stock also got a lift from increasing enthusiasm around next week's launch of Disney+.

To be sure, Trump threw cold water on recent U.S.-China trade optimism by saying Friday morning he has not agreed to roll back existing tariffs. Stocks fell to their lows of the day on those comments.

"Yearlong, we've been going back and forth with the tariffs," said Kathy Entwistle, senior vice president of wealth management at UBS. "Things look good and the market goes up. Then someone says, 'no that's not what we said' and the market goes down."

"We have to be cognizant that this can still happen," Entwistle said. But "when you get clarity, you get more excitement in the markets and you realize there's more opportunities for them to go up."

—CNBC's Silvia Amaro contributed to this report.