Week 42 in Brief
- US stocks closed higher on Friday, booking weekly gains driven by strong positive third-quarter earnings, despite technology stocks coming 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 the major indices perform?
- The Dow Jones Industrial Average was 73.94 points, or 0.2%, to close at a record 35,677.02.
- The S&P 500 index slipped 4.88 points, 0.1%, to end at 4,544.90.
- The Nasdaq Composite dropped 125.50 points, or 0.8%, finishing at 15,090.20.
- 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 US 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 Earnings: Technology stocks came under pressure Friday Snapchat parent Snap Inc. forecast a weaker-than-expected holiday season and expressed concerns over digital advertising; this prompted a decline in internet and social-media related stocks, including Google-parent Alphabet and Facebook Inc. 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.
- Still, 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. Profits are on pace in the quarter to increase 33.7%.
- Federal Reserve Comments: The S&P 500 and Dow traded in record territory early Friday, but those gains initially evaporated 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. The Fed Chair said the U.S. labor market might reach “maximum employment” next year, possibly paving the way for interest rate hikes.
- 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.
- Economic Data: The 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. Analysts believe this is 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.
Which US stocks were in focus Friday?
- Tesla Stock Closed Above $900 for First Time: The stock’s recent run has been incredible, as it closed at $909.68, up about 1.8%. The S&P 500 dropped about 0.1%, while the Dow Jones Industrial Average added about 0.2%. Tesla delivered record earnings in its latest report.
- Beyond Meat Inc. shares 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 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%.
- 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 on oil and gas demand.
- Shares of Honeywell International Inc. 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 the European markets perform?
- European stocks rose on Friday on a surge in technology stocks, strong earnings from France’s L’Oreal, and a broad boost to sentiment provided by a surprise interest payment from debt-ridden China Evergrande Group.
- The STOXX 600 added 0.5% to close at over six-week highs and logged its third consecutive week of gains, up 0.5%.
- Friday marked another big day of corporate earnings in Europe, with Renault, Banco Sabadell, the London Stock Exchange, and InterContinental among those reporting before the bell.
- France’s blue-chip CAC 40 rose 0.7% and outperformed its European peers, riding on a 5.1% surge in L’Oreal shares following the cosmetics company’s strong results.
- Shares in Dutch semiconductor equipment maker ASML and German software firm SAP rose 3.2% and 1.2% respectively, after stumbling earlier this week following their results. The tech sector rose 1.5%.
- Markets in Europe emulated overnight gains in Asia-Pacific, where shares of China Evergrande Group bounced in Hong Kong following media reports that the embattled developer is set to pay off a coupon payment on a dollar-denominated bond.
- At the top of the Stoxx 600, Swedish sports equipment maker Thule climbed more than 9% after strong third-quarter earnings.
- Investors appeared to look past a survey that showed growth in eurozone business activity slowed in October as firms face soaring costs due to supply-chain constraints, while the bloc’s dominant service industry struggled amid ongoing COVID-19 concerns.
- Eurozone inflation expectations hit their highest levels in years, putting additional pressure on the European Central Bank over its insistence on maintaining crisis-era stimulus. The central bank is set to meet next week.
How did Asian markets perform?
Asian markets finished mixed as of the most recent closing prices. The Shanghai Composite ended 0.3% lower, but logged a weekly rise of 0.3%, while the Hang Seng Index rose 0.4% in Hong Kong for a weekly advance of 3.1%, and Japan’s Nikkei 225 picked up 0.3%, helping cut a weekly loss to 0.9%.
Commodities and Bonds
- The yield on the 10-year Treasury note 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.
- Oil futures ended higher, with the U.S. benchmark rising 1.5% to settle at $83.76 a barrel.
- Gold futures 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 dollar slipped against a basket of currencies on Friday as investors continued to unload long positions that benefited from an increase in bets that the Federal Reserve will raise rates sooner than previously expected.
- The ICE U.S. Dollar Index, a measure of the currency against a basket of six major rivals, fell about 0.2% to 93.57 and is down from a one-year high of 94.56 last week.
- The euro gained 0.18% to $1.1646 against the dollar.
- The yen gained against the greenback, though it remains the weakest performer having dropped by more than 10% this year. The dollar was last down 0.19% against the Japanese currency at 113.77 yen.
The earnings season continues with 30% of the S&P 500 companies including Apple, Amazon, Alphabet, Microsoft, Visa, Advanced Micro Devices, Twitter, General Electric, and Lockheed Martin, reporting Q3 earnings.