Closing Market Summary: Stocks Settle Mixed Following Amazon EarningsEquity indices finished Friday's session mixed; the Dow (+0.2%) advanced to a new record high for the third day in a row while the S&P 500 (-0.1%) and the Nasdaq (-0.1%) settled a tick below their unchanged marks. All three major averages finished near their best marks of the day. For the week, the S&P 500 finished flat.
The Nasdaq opened Friday's session with a sizable loss of 0.7% after one of its most influential components--Amazon (AMZN 1020.04, -25.96)--missed earnings expectations. The online retailer was down as much as 4.3% in early action, but, like the Nasdaq, the company was able to trim its loss a bit, eventually settling lower by 2.5%.
Amazon's negative performance took a toll on the consumer discretionary sector (-0.7%), which finished near the bottom of the day's leaderboard. In addition, coffee giant Starbucks (SBUX 54.00, -5.50) weighed on the consumer discretionary space--plunging 9.2% to its lowest level in six months--after the company missed top-line estimates and issued disappointing guidance.
The consumer staples sector (-0.9%) finished at the very bottom of the sector standings with tobacco giant Altria (MO 66.94, -7.02) leading the retreat. MO shares sold off sharply after the U.S. Food and Drug Administration announced a plan to reduce nicotine levels in cigarettes. Altria reclaimed a chunk of its initial decline, but still ended the day with a solid loss of 9.5%.
Meanwhile, the energy sector (-0.2%) settled roughly in line with the broader market despite a solid performance from crude oil, which climbed 1.4% to $49.74/bbl. For the week, WTI crude advanced 8.7%, which marks its biggest one-week rally of the year.
Within the energy sector, Dow components Exxon Mobil (XOM 79.60, -1.23) and Chevron (CVX 108.12, +2.01) saw a mixed response to their latest earnings reports; CVX jumped 1.9% after reporting better than expected revenues while XOM dropped 1.5% after missing earnings expectations.
The top-weighted technology sector (-0.1%) also finished roughly in line with the broader market. Intel (INTC 35.31, +0.34) advanced 1.0% after beating both top and bottom line estimates and issuing upbeat guidance. However, the PHLX Semiconductor Index dropped 0.4% despite Intel's positive performance.
In total, eight of the eleven sectors finished in the red with losses ranging from 0.1% to 0.9%. The health care (+0.5%), financials (unch), and industrials (+0.2%) spaces were the three advancers.
Merck (MRK 64.11, +0.42) helped the health care sector finish at the top of the leaderboard after the company reported better than expected earnings and revenues; MRK shares settled higher by 0.7%. It's also worth noting that the Senate failed to pass a 'skinny' repeal of the Affordable Care Act in a tight 49-51 vote.
As for industrials, transports bounced back on Friday after sending the Dow Jones Transportation Average on a 3.1% plunge in the prior session. The DJTA finished Friday higher by 0.4%.
It's also worth noting that North Korea launched another intercontinental ballistic missile (ICBM) on Friday, marking Pyongyang's 11th ballistic missile test this year. Stocks did not react to the news.
Outside of the stock market, Treasuries rallied in a curve-flattening trade, leaving the 2-yr yield (1.36%) and the 10-yr yield (2.29%) lower by one basis point and three basis points, respectively. Meanwhile, the U.S. Dollar Index (93.15, -0.62) dropped 0.7% to a fresh 15-month low.
Reviewing Friday's economic data, which included the advance estimate for second quarter GDP, the second quarter Employment Cost Index, and the final reading of the University of Michigan Consumer Sentiment Index for July:
- Advance second quarter GDP pointed to an expansion of 2.6%, while the consensus expected a reading of 2.8%. The second quarter GDP Deflator came in at 1.0%, which is below the consensus of 1.3%.
- The key takeaway from the Q2 GDP report, then, is that the average for the first half of 2017 was subpar at 1.9%, which should continue to keep any concerns about the prospect of a near-term rate hike from the Fed under wraps.
- The second quarter Employment Cost Index rose 0.5%, while the consensus expected an increase of 0.6%.
- The key takeaway from the report is that there was a moderation in year-over-year growth rates for wages and salaries, reflecting the lack of wage-based inflation pressure that has helped keep consumer spending activity modest and overall inflation low.
- The final reading of the University of Michigan Consumer Sentiment Index for July rose to 93.4 (consensus 93.1) from 93.1 in the preliminary reading.
- Despite the small decline, the key takeaway from the report is the indication that the Sentiment Index is still higher in the first seven months of 2017 than in any other year since 2004.
On Monday, investors will receive just two pieces of economic data--July Chicago PMI (consensus 60) and June Pending Home Sales (consensus 1.1%). The two reports will be released at 9:45 ET and 10:00 ET, respectively.
- Nasdaq Composite +18.4% YTD
- S&P 500 +10.4% YTD
- Dow Jones Industrial Average +10.5% YTD
- Russell 2000 +5.3% YTD