Tech shares in focus as U.S. opens probe into anti-competitive practices
The S&P 500 and Nasdaq stock indexes closed at record on Wednesday despite mixed earnings and economic data and antitrust probes into leading U.S. technology stocks.
But the Dow ended lower after disappointing earnings from Boeing and Caterpillar.
How are the major benchmarks faring?
The Dow Jones Industrial Average DJIA, -0.29% fell 79.22 points or 0.3% to 27,269.97, but the S&P 500 index SPX, +0.47% gained 14.09 points or 0.5% to an all-time closing high at 3,019.56, the benchmark also set an intraday peak at 3,019.56. The Nasdaq Composite Index COMP, +0.85% closed up 70.10 points or 0.9% to a fresh high also at 8,321.50, with that tech-heavy gauge setting an intraday record at 8,321.50.
Year-to-date the S&P 500 index is now up 20.45% while the Nasdaq Composite is up 25.41%.
The Russell 2000 RUT, +1.64% an index of small-capitalization stocks, rose 1.64% to 1,580.42 and is now up 17.19% for the year.
What’s driving the market?
Chip-related stocks climbed to record highs Wednesday following strong earnings from Texas Instruments Inc. TXN, +7.44% The PHLX Semiconductor Index SOX, +3.10% soared 3.1% to 1,622,02, booking its first record finish since April 24.
Over 25% of S&P 500 index companies have reported second-quarter earnings so far and 78% have posted a better-than-expected profit, according to FactSet data.
However, some Dow components reported disappointing earnings. Caterpillar Inc. CAT, -4.48% fell 4.5%, after the manufacturer of construction and mining equipment reported quarterly profit that fell below analyst expectations, continuing a trend of subdued performance in industrial stocks during the second-quarter earnings season. Boeing Co. BA, -3.12% lost 3%, after the aerospace giant swung to a loss in the second quarter.
Facebook FB, +1.14% produced better-than-expected results, Ford Motor’s analysts’ consensus estimates for earnings, PayPal delivered hotter-than-expected results but offered weak guidance, after the bell on Wednesday.
Tesla also was scheduled to report quarterly results late-Wednesday.
The Justice Department late Tuesday said its antitrust division was reviewing “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”
Facebook and Apple Inc. AAPL, -0.08% are seen likely most at risk if government regulators are serious about pursuing antitrust actions, while Google parent Alphabet Inc. GOOG, -0.73% GOOGL, -0.72% and Amazon.com Inc.AMZN, +0.32% are also under scrutiny.
But “we think that a broad movement to break up companies solely because they are large will fail without a change to existing antitrust laws,” said Dan Ives, an analyst at Wedbush Securities, in a note. “We continue to be bullish on the likes of Apple, Google, Facebook, and Amazon and would be buyers of these names at current valuation.”
In economic data, U.S. new home sales rebounded in June, the first gain in three months, but U.S. manufacturers expanded in July at the slowest pace in almost 10 years. IHS Markit said its manufacturing PMI slid to 50 this month from 50.6 in June, marking the lowest level since September 2009 just as the current expansion was getting under way.
Manufacturing output contracted in both the first and second quarters of this year, according to the Federal Reserve’s report on industrial production. That was the first back-to-back decline since the soft patch in 2015 and 2016 and one of the factors, along with trade frictions and slowing global economic growth, driving the Federal Reserve to likely lower interest rates next week.
However investors were encouraged by news Tuesday that a U.S. delegation headed by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin is set to travel to China to revive trade talks next week, The Wall Street Journal reported, marking the first in-person talks since the Group of 20 summit last month.
Which other stocks are in focus?
Facebook shares ended up after the FTC formally announced a $5 billion settlement for deceiving users about its privacy practices. Facebook is also settling with the SEC for $100 mln over a probe into handling of user data. Facebook is due to report second-quarter earnings after the close of trade Wednesday.
Shares of United Parcel Service Inc. UPS, +8.66% ended sharply higher after the company reported better-than-expected earnings and profit for the second quarter.
AT&T ATT, +0.98% was up after reporting net phone subscriber growth that beat forecasts
Texas Instruments TXN, +7.44% shares rallied after the chip maker topped Wall Street estimates for the quarter late Tuesday.
Shares of Snap Inc. SNAP, +18.75% rallied after the social media giant reported better-than-expected earnings Tuesday evening.
How are other markets trading?
U.S. Treasury prices rose Wednesday, dragging yields lower, after signs of weakness in the eurozone’s manufacturing sector helped outweigh a tepid auction for government paper in the afternoon. The 10-year Treasury note yield TMUBMUSD10Y, -0.98% fell by 2.3 basis points to 2.052%.
Oil futures settled lower on Wednesday, as support from a storm-induced, 11 million-barrel drop in U.S. crude supplies wore off and traders turned their attention back to concerns about weaker energy demand. West Texas Intermediate crude for September delivery CLU19, +0.63% fell 89 cents, or 1.6%, to settle at $55.88 a barrel on the New York Mercantile Exchange.
Gold futures on Wednesday headed higher as investors picked up the haven ahead of a closely watched meeting of Europe’s central bank, which is likely to result in an announcement of more stimulus in the eurozone. Investors also bet on a higher chance of Britain exiting from the European Union without a trade agreement, pushing the metal higher. Gold GCQ19, +0.19% prices added 0.4% to $1,427. The U.S. dollar DXY, +0.03% meanwhile, slid 0.1% early Wednesday.
Stocks traded in Asian markets were mostly higher on Wednesday, with the China CSI 000300, +0.82% ending the day up 0.8%, the Nikkei 225 NIK, +0.22% rising 0.4% and Hong Kong’s Hang Seng Index HSI, +0.25% advancing 0.2%. European stocks SXXP, +0.31% ticked lower.