U.S. stock benchmarks closed out Friday little changed, and booked modest losses, as investors expressed muted enthusiasm following strong corporate results, even from some of the market’s biggest and most influential companies.
Three large-capitalization internet and technology companies reported better-than-expected results, and while the stocks mostly gained in response, they ended well off their highs and the advances didn’t spark a broader rally. A tepid earnings report from energy giant Exxon Mobil, along with data indicating a decelerating rate of economic growth, also capped the buying mood.
What are markets doing?
The Dow Jones Industrial Average DJIA, -0.05% fell 11.15 points, or less than 0.1%, to 24,311.19. The S&P 500 index SPX, +0.11% closed up 2.97 points to 2,670.91, a gain 0.1%. The Nasdaq Composite Index COMP, +0.02% inched up by 1.12 point to 7,119.80, virtually unchanged.
For the week, the Dow fell 0.6% and the Nasdaq lost 0.4%. The S&P closed down a mere 0.01%, however, that was enough for all three to post their first weekly decline of the past three.
What is driving the market?
First-quarter gross domestic product data showed the U.S. economy expanded at a 2.3% annual pace in the first three months of 2018. While this pace was slower than the prior three quarters, it was above the 2% growth rate that had been expected.
Beyond corporate earnings and data, investors appeared to shrug off a historic meeting between North Korean leader Kim Jong Un and South Korean President Moon Jae-in. The two leaders signed a declaration that they will work toward a “complete denuclearization” of the Korean Peninsula and agreed to formally end the Korean War with a peace treaty, according to media reports. While the news had little obvious impact on U.S. stocks, the iShares MSCI South Korea ETF EWY, +1.18% rose 1.2%.
Concerns about a rise in U.S. interest rates were expected to continue to abate, as the yield on 10-year Treasury notes TMUBMUSD10Y, -0.81% retreated further from the psychologically important 3% level.
Which stocks are in focus?
Amazon AMZN, +3.60% shares climbed 3.6% a day after the e-commerce giant reported a quarterly profit that more than doubled, and as it announced a 20% increase in Prime subscription prices. While Amazon hit an all-time intraday record of $1,638.10 in early trading, it closed off that high and below its closing record at $1,598.39.
Microsoft Corp. MSFT, +1.65% rose 1.7%, briefly touching its own intraday high at $97.90, after it released better-than-expected earnings and strong guidance. On the downside, Intel Corp. INTC, -0.60% fell 0.6% even as quarterly results and outlook beat Wall Street forecasts late Thursday.
Intel was the latest notable stock to fall despite topping analyst forecasts, but Microsoft also ended below its intraday peak. Microsoft had risen as much as 3.9% while Intel rose as much as 5.2%. Both stocks are Dow components.
So far this season, about 80% S&P 500 companies that have reported beat forecasts, but the better-than-expected results have often failed to lift individual share prices.
Exxon Mobil Corp. XOM, -3.80% fell 3.8% after the Dow component reported first-quarter earnings that missed expectations, though revenue came in ahead of analyst forecasts. Chevron Corp. CVX, +1.93% rose 1.9% after posting stronger-than-expected earnings, but revenue that failed to exceed forecasts. The energy sector fell 1.2%, by far the weakest performer among the S&P 500’s 11.
Expedia Group Inc. EXPE, +8.20% jumped 8.2% after the travel site late Thursday posted better-than-expected bookings.
Starbucks Corp. SBUX, -1.72% slipped 1.7% after the coffee giant late Thursday reported mixed results for its fiscal second quarter.
Colgate-Palmolive Co. CL, -0.02% ended flat after the consumer goods giant reported a first-quarter profit beat and revenue miss early Friday.
What are investors saying?
“What we can say with fair conviction today is that earnings season so far, and we are now past the halfway point, has not served to brighten investor moods,” said James Meyer, chief investment officer at Tower Bridge Advisors.
Jack de Gan, chief investment officer at Harbor Advisory Corp., said that while GDP growth remained solid, it had been slow. “I’m worried there may have been an inflection point when Trump started to talk about trade and tariffs. If we start to see more trade tensions, then the idea of 3% growth goes out the window.”
He was more sanguine on the earnings season, citing tech stocks and Amazon in particular. “These stocks continue to post extremely fast growth, and I think the story of the market being led by tech names is still intact. The FAANG group will make a recovery and should continue leading the market in the remainder of the year.” FAANG, refers to Facebook, Apple, Amazon Netflix Inc. NFLX, -0.71% and Google-parent Alphabet Inc.
What are other markets doing?
Asia markets had a mixed session, with China stocks SHCOMP, +0.23% down on concerns about possible U.S. action against tech companies. European stocks SXXP, +0.23% closed modestly higher, and British stocks rallied on weaker pound following dismal U.K. GDP data.
U.S. oil prices CLM8, -0.32% settled 9 cents lower at $68.10 a barrel.
Meanwhile gold prices GCM8, +0.47% closed 0.4% higher at $1,323.40 an ounce but booked 1% weekly decline.
The ICE U.S. Dollar Index DXY, -0.05% pared most of the session’s gains to trade flat at 91.607. The index was on track for largest weekly gain since November 2016.
