Closing Market Summary: Stocks Rebound, But Still Finish Solidly Lower for the WeekStocks rebounded on Friday, recouping a good chunk of their weekly losses in a volatile day of trading. The S&P 500 added as much as 1.7% at the start of the session, but nearly wiped it all out intraday before rallying to finish higher by 1.4%.
The Dow Jones Industrial Average advanced 1.2%, and the tech-heavy Nasdaq Composite outperformed, finishing higher by 2.3%. Small caps underperformed, though, leaving the Russell 2000 with a slim gain of 0.1%. For the week, the four indices lost between 3.7% and 5.2%.
This week's sharp sell-off propagated a belief that the major indices had gotten oversold on a short-term basis and were due for a rebound. Friday's upward movement also found some technical support from the S&P 500's 200-day moving average (2766.17), which the index closed just slightly below at 2765.62.
The third quarter earnings season began on a mixed note on Friday morning when big banks JPMorgan Chase (JPM 106.95, -1.18, -1.1%), Citigroup (C 69.84, +1.46, +2.1%), and Wells Fargo (WFC 52.11, +0.67, +1.3%) reported before the opening bell. JPMorgan and Citigroup both beat earnings estimates, but Wells Fargo came up short. In the company's conference call, JPMorgan CEO Jamie Dimon expressed optimism in the global economy, although he did note that trade tensions present some risks going forward.
On a related note, PNC (PNC 124.26, -7.35) tumbled 5.6% despite beating bottom-line estimates.
The financials sector added as much as 1.6% following bank earnings, but eventually rolled over, bringing the broader market with it. The group did rebound in the final stretch though, closing higher by 0.1%. 10 of 11 sectors finished in the green, and information technology was the top performer with a gain of 3.2%.
Within the tech sector, giants Apple (AAPL 222.11, +7.66, +3.6%) and Microsoft (MSFT 109.57, +3.66, +3.5%) outperformed, as did chipmakers, evidenced by a 2.0% jump in the Philadelphia Semiconductor Index. Meanwhile, in the communication services sector (+2.1%), Netflix (NFLX 339.56, +18.46) rallied 5.8% after Citigroup said its recent tumble represents a buying opportunity.
Away from equities, U.S. Treasuries finished roughly flat on Friday, with the benchmark 10-yr yield ticking up one basis point to 2.14%. Meanwhile, the U.S. Dollar Index rebounded from a more than two-week low, climbing 0.3% to 94.96, and WTI crude climbed 0.6% to $71.41/bbl. Crude finished solidly lower for the week though, dropping 3.9%.
Also of note, the CBOE Volatility Index (VIX) fell 14.3% on Friday, retreating from its highest level since February.
Reviewing Friday's economic data, which included September Import/Export Prices and the preliminary reading of the University of Michigan Consumer Sentiment Index for October:
- Export prices were flat in September after declining 0.2% in August and import prices were up 0.5% after being down 0.4% in August. Excluding agricultural exports, export prices increased 0.2% after declining 0.2% in August. Excluding fuel, import prices were unchanged after declining 0.2% in August.
- The key takeaway from the report is rooted in the understanding that nonfuel import prices are being held in check, which is helpful in terms of easing some of the market's inflation angst.
- The preliminary University of Michigan Index of Consumer Sentiment for October checked in at 99.0 (consensus 100.0) versus the final reading of 100.1 for September.
- The key takeaway from the report is that it revealed some budding concerns about inflation crimping real income expectations, which is something to be watched closely considering spending is driven more by income growth than consumer confidence.
Looking ahead, investors will receive September Retail Sales on Monday.
- Nasdaq Composite +8.6% YTD
- S&P 500 +3.5% YTD
- Dow Jones Industrial Average +2.5% YTD
- Russell 2000 +0.7% YTD