The Dow Jones Industrial Average closed at a record high Friday, its first such milestone since August, with U.S. stock benchmarks booking weekly gains on optimism surrounding third-quarter earnings, even as shares of technology companies fell under pressure.
Comments from Federal Reserve Chairman Jerome Powell, which could be read as hawkish, also appeared to keep stock gains in check.
How did stock indexes trade?
- The Dow Jones Industrial Average DJIA, +0.21% rose 73.94 points, or 0.2%, to close at a record 35,677.02.
- The S&P 500 SPX, -0.11% index slipped 4.88 points, 0.1%, to end at 4,544.90.
- The tech-heavy Nasdaq Composite Index COMP, -0.82% dropped 125.50 points, or 0.8%, finishing at 15,090.20.
On Thursday, the Dow fell 6 points, or 0.02%, to 35,603, the S&P 500 increased 14 points, or 0.3%, to a record 4,549.78, and the Nasdaq Composite gained 94 points, or 0.62%, to 15216.
For the week, the Dow gained 1.1%, the S&P 500 was up 1.6%, and the Nasdaq Composite advanced 1.3%.
What drove the market?
The U.S. equity market on Friday faced pressure from selling in large-capitalization technology stocks, which weighed on the tech-heavy Nasdaq and the broad-market S&P 500.
Quarterly results late Thursday from Snapchat parent Snap Inc. SNAP, -26.59%, which forecast a weaker-than-expected holiday season and expressed concerns over digital advertising, prompted a decline in internet and social-media related stocks, including Google-parent Alphabet GOOGL, -3.04% and Facebook Inc. FB, -5.05%.
“When you have 85% of companies beating estimates, it’s the misses that are standing out here,” said Jeffrey Kleintop, chief global investment at Charles Schwab, in a phone interview Friday. “They’re really getting punished today,” he said, pointing to the slide in shares of Intel Corp. INTC, -11.68% and Snap.
Shares of Snap plummeted 26.6% Friday, while Intel dropped 11.7% after the chip maker’s revenue and data-center sales just missed expectations.
Earlier in Friday’s session, the S&P 500 and Dow traded in record territory but gains already were evaporating when Fed Chairman Jerome Powell said the U.S. labor market might reach “maximum employment” next year, possibly paving the way for interest rate hikes.
Those comments, made during a speech for the Bank for International Settlements, come as the Fed sees a serious risk of inflation expectations moving persistently higher, with other central bankers saying that it would use its tools to bring inflation in line with the annual 2% target hoped for by policy makers.
Still, bullishness on Wall Street has appeared to be durable after the S&P 500 on Thursday logged its first record closing high since Sept. 2. and the Dow rising to a fresh peak Friday.
A largely upbeat earnings reporting season has pushed the indexes up this week, though worries over inflation, the continuing COVID-19 pandemic, and troubles for China’s economy remain a nag. So far for the third quarter earnings season, 84% of companies are reporting EPS above estimates, according to Refinitiv. Profits are on pace in the quarter to increase 33.7%, according to Refinitiv.
“Clearly the economy lost momentum in the third quarter,” but the market is coming around to the view that “economic activity is not slumping,” Mark Luschini, chief investment strategist of Janney Montgomery Scott, told MarketWatch Friday.
In economic reports, IHS Markit’s survey of senior business executives in service-oriented companies rebounded to a three-month high of 58.2 from 54.9 in September. “That’s a pretty good jump in the services sector,” said Kleintop, a sign of “improving confidence” in the economic reopening as restaurants see more activity.
A similar survey of manufacturers slipped to 59.2 from 60.7. Any reading over 50 signals improving conditions.
Another factor that may be offering some relief to bulls is President Joe Biden saying at CNN town hall meeting Thursday evening that he probably doesn’t have the votes to boost corporate taxes. He also said he may alter or eliminate the filibuster to protect voting rights, and would consider using the National Guard to unclog the supply chains.
Which companies were in focus?
- Beyond Meat Inc. shares BYND slid 11.8% Friday, after the plant-based food company issued a revenue warning for the third quarter, citing a range of issues including the highly transmissible delta variant of the coronavirus.
- Seagate Technology Holdings PLC STX delivered better-than-expected earnings Friday morning and issued a forecast for the current period that exceeded analyst expectations at the midpoint. Shares climbed about 6.1%.
- 23andMe Holding Co. ME said Friday it agreed to pay $400 million for Lemonaid Health Inc., the on-demand platform for accessing medical care and pharmacy services, in a bid to add telemedicine and prescription drug delivery services. Shares of 23andMe rose 5.2%.
- Shares of Schlumberger slid 1.1%, after the oil services company reported a third-quarter profit that matched expectations but revenue rose missed, but provided an upbeat outlook oil and gas demand.
- Shares of Honeywell International Inc. HON slumped about 3.2%, after the aerospace and building materials company reported third-quarter profit that topped expectations but revenue that came up short, citing “tough challenges” in the supply chain.
How did other assets fare?
- The yield on the 10-year Treasury note TMUBMUSD10Y fell 2 basis points to 1.654% though it’s still up 8 basis points for the week. Yields and debt prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, a measure of the currency against a basket of six major rivals, fell about 0.2%.
- Oil futures ended higher, with the U.S. benchmark CL00 rising 1.5% to settle at $83.76 a barrel. Gold futures GC00, -0.18% rose $14.40, or 0.8%, to settle at $1,796.30 an ounce. For the week, gold was up 1.6% and notched a fourth weekly gain in five weeks.
- The Stoxx Europe 600 SXXP closed 0.5% higher Friday for a weekly gain of 0.5%. London’s FTSE 100 UKX added 0.2%, but posted a weekly decline of 0.4%.
- The Shanghai Composite SHCOMP ended 0.3% lower, but logged a weekly rise of 0.3%, while the Hang Seng Index HSI rose 0.4% in Hong Kong for a weekly advance of 3.1%, and Japan’s Nikkei 225 NIK picked up 0.3%, helping cut a weekly loss to 0.9%.