The S&P 500 fell but managed to post its fourth straight weekly advance, as strong earnings from a number of firms helped offset an end-of-week slide in the technology sector. Investors parsed a mixed batch of data and earnings results over the course of the week that broadly suggested the U.S. economy remains strong, even as certain industries have shown signs of weakening. Data Friday showed the U.S. economy grew 4.1% from April through June-the fastest pace in nearly four years, though lower than the expectation of economists surveyed by The Wall Street Journal. Tech titans like Alphabet and Amazon.com reported earnings that blew past analysts’ estimates, sending their shares higher. Yet disappointing earnings from a number of other companies put pressure on the technology sector, sparking wild swings. Facebook logged the biggest one-day loss in market capitalization ever Thursday after warning its growth was slowing, while Intel and Twitter tumbled after their earnings failed to meet investors’ expectations. Twitter slumped $8.82, or 21%, to $34.12 Friday, logging its biggest one-day decline since February 2014. Meanwhile, Intel shed 4.48, or 8.6%, to 47.68 and Netflix-which earlier in the month had missed its own estimates for subscriber growth-fell 7.88, or 2.2%, to 355.21. Shares of home builders like PulteGroup and Lennar also struggled for traction after data showed home sales slipping in the second quarter, even as the broader economy continued expanding. After a nine-year rally, investors have largely come to expect solid earnings across the board.
IRON ORE: 67.75s + 2.02 (August contract)
Oil prices declined as signs of rising production helped ease geopolitical concerns that had bolstered the market this week. Light, sweet crude for September delivery fell 1.3% to $68.69 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 0.3% to $74.29 a barrel. On Friday, Russia’s energy minister indicated that the country may increase production by more than previously anticipated this year, which could undermine the joint agreement among major oil exporters to limit supply made in 2016. Meanwhile, anticipation of increased supply in North America also weighed on prices, traders said. Friday data from Baker Hughes showed that the number of active oil rigs in the U.S. increased by three to 861. In the Permian Basin in west Texas, the number of active rigs climbed to match its highest total since January 2015. Expectations for a restart of operations at the Canadian oil-sands facility Syncrude at the end of the month put pressure on the market as well, said Bob Yawger, director of the futures division at Mizuho Securities U.S.A. Major oil producers have been increasing production ahead of U.S. sanctions on Iran, due to come into force in November, which are likely to curb Iranian oil exports.
The U.S. dollar inched lower after the first reading of U.S. growth for the second quarter showed the economy grew at the strongest pace in nearly four years but slightly less than analysts expected. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, closed down 0.1 point, or 0.1%, at 88.29, paring its early gains following the GDP number. Growth momentum shifting back to the U.S. has kept the dollar near its highest levels in more than a year. Friday’s data showed gross domestic product rose 4.1% in the second quarter, up from the first-quarter’s revised growth rate of 2.2% but below the 4.4% clip expected by economists surveyed by The Wall Street Journal. Analysts said the reading should do little to derail U.S. growth momentum, though some are skeptical that pace can be maintained. Investors had been expecting a strong reading Friday for weeks, and President Donald Trump Thursday even predicted a positive number. Investors are waiting to see if the Federal Reserve will raise interest rates more quickly than previously anticipated to keep the economy from overheating, as some think the central bank will need to get more aggressive to send the dollar to fresh 2018 highs.
The Bank of Japan’s meeting next week may prove to be significant for the Japanese yen after news reports last week indicated that the central bank might tweak its yield curve guidance. Meanwhile, Japan’s Nikkei gained 0.6% despite Nomura plunging almost 6% after it reported disappointing quarterly profits. South Korea’s Kospi was up 0.2% even as Samsung Electronics scratched back from early losses to close flat. Stocks in China largely fell, with the Shanghai Composite down 0.3%, while the Shanzhen Composite dropped 0.6%. Hong Kong’s Hang Seng Index rose 0.1% even as Tencent and China Construction Bank each slipped and automaker Geely slid over 3%.