by Investing.com Staff, Investing.com
U.S. stocks closed lower on Friday in a broad consumer discretionary-led selloff after Visa and
Amazon, a pair of closely watched bellwether names, reported disappointing results.
While the S&P 500 found support at its 14-day moving average, suggesting a recent positive trend in equities remains intact, the day’s decline was enough to erase the benchmark index’s gain for the week.
Earnings have largely been better than expected this season in terms of both profit and revenue. However, there have been high-profile disappointments, including Boeing Co and Caterpillar Inc earlier this week.
Amazon.com Inc (NASDAQ:AMZN) tumbled 9.6 percent to $324.01 as the biggest drag on the S&P 500 after reporting an unexpectedly big second-quarter loss due to greater expenses on investments. About 17.8 million shares changed hands, nearly five times its 50-day average of 3.6 million.
The online retailer weighed down the consumer discretionary sector, which lost 1.2 percent.
Visa Inc (NYSE:V) was the Dow’s largest decliner, down 3.6 percent to $214.77 after the world’s largest credit and debit card company cut its revenue forecast for the year. As the costliest stock in the price-weighted index, Visa accounted for about half the Dow’s drop.
“The earnings season overall has been in line (with analysts’ estimates), but when companies with rich valuations disappoint, you’re going to get crucified,” said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
“Amazon and Visa are significant components of the overall market and bellwethers of their respective industries. That gives you pause.”
Only two of the 10 primary S&P 500 industry sectors were positive on the day. About 64 percent of stocks traded on both the New York Stock Exchange and Nasdaq ended the day lower.
The Dow Jones industrial average fell 123.23 points, or 0.72 percent, to 16,960.57, the S&P 500 lost 9.64 points, or 0.48 percent, to 1,978.34 and the NASDAQ Composite dropped 22.54 points, or 0.5 percent, to 4,449.56.
For the week, the Dow is down 0.8 percent, the S&P is flat and the Nasdaq is up 0.4 percent in its second straight weekly rise.
About 4.95 billion shares traded on all U.S. platforms, according to BATS exchange data, below the month-to-date average of 5.56 billion.
Starbucks (NASDAQ:SBUX) fell 2.1 percent to $78.74 even as quarterly sales at established stores in its Americas region grew a stronger-than-expected 6 percent.
Pandora Media (NYSE:P) dropped 10 percent to $25.75 after it forecast adjusted profit below analysts’ estimates for the current quarter.
On the upside, Baidu (NASDAQ:BIDU) was up 11 percent to $226.50. China’s biggest Internet search company blew past Wall Street’s targets with a 34.1 percent jump in quarterly net profit, helped by a surge in mobile revenue.
El Pollo Loco Holdings Inc shares surged 60 percent to $24.03 in their trading debut after the company’s initial public offering was priced at the high end of an expected range. The stock was the biggest percentage gainer among Nasdaq stocks.
The market did not react to data showing orders for long-lasting U.S. manufactured goods rose more than expected in June, supporting hopes for a strong economic rebound in the second quarter.
Goldman Reallocates, Increases Caution
Goldman Sachs downgraded its global allocation to equities to neutral on a short-term basis on Friday, even though the brokerage remained overweight stocks for the longer term, it said in a research note.
The firm said it was worried that a rise in rates would drive stocks lower over the next three months, adding: “We also expect the general pace of returns to slow compared to what we have seen in the last couple of years.”
Goldman said the global acceleration in economic growth is “largely behind us and geopolitical risks are elevated.” Still, it said equities were the most attractive class on a 12-month horizon “by a wide margin.”
Equity markets worldwide have rallied steadily through the year. The MSCI All-World Index hit a record in early July, and has gained more than 5 percent in 2014.
Goldman noted that the gap between dividend yields and government bond yields remained high, which suggests more outperformance by the equity market.
Dividing the world up by regions, Goldman was overweight in Europe and Japan and underweight in the United States. When looking at specific sectors, the firm was high on growth industries – it has overweight ratings for technology stocks in the United States, Europe, Japan and Asia.
The dollar traded higher against most major currencies on Friday on news that U.S. demand for long-lasting goods and appliances was stronger in June than markets were expecting, though geopolitical concerns dampened the greenback’s gains.
In U.S. trading on Friday, EUR/USD was down 0.23% at 1.3432.
The Census Bureau reported earlier that U.S. durable goods orders rose 0.7% in June, beating expectations for a 0.5% gain, after declining of 1% in May, whose figure was revised from a previously estimated 0.9% contraction.
Core durable goods orders, which are stripped of transportation items, grew 0.8% in June, beating expectations for a 0.6% gain, after a 0.1% downtick in May, whose figure was revised from a previously estimated flat reading.
The data came a day after the U.S. Department of Labor reported that the number of individuals filing for initial jobless benefits in the week ending July 19 declined by 19,000 to 284,000, defying market forecasts for claims to rise by 5,000.
The data primed market expectations for the Federal Reserve to wind down its bond-buying stimulus program around October and raise interest rates in 2015.
Geopolitical concerns capped the dollar’s advance by stoking fears events in Ukraine and the Middle East will drag on global growth.
The Pentagon said earlier that Russia may be set to provide more sophisticated weapons to Ukrainian separatists, which spooked investors, sending them away from the dollar and stocks and into gold in search of safety.
Israel, meanwhile, rejected calls for a ceasefire and continued its ground offensive in Gaza.
The euro, meanwhile, came under pressure after Ifo Institute for Economic Research reported earlier that its German business climate index fell to a nine-month low of 108.0 this month, down from 109.7 in June. Analysts had expected the index to tick down to 109.4 in July.
A separate report showed that the Gfk German consumer climate index rose to a seven-and-a-half-year high of 9.0 this month, up from a reading of 8.9 in June. Analysts had expected the index to remain unchanged in July.
The greenback was up against the pound, with GBP/USD down 0.08% at 1.6972.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.23% at 81.13.
Commitments of Traders data from the CFTC (Commodity Future Trading Commission) showed small moves of sentiment this week. The euro and Japanese yen remained strongly bearish, with the euro moving moderately to even more bearish sentiment,; the British pound remained strongly bullish, but less so than last week. The Australian dollar and Mexican peso remained strongly bullish. All sentiment is relative to the U.S. dollar.
Bottom fishers snapped up nicely priced positions in gold on Friday, sending the commodity posting solid gains after upbeat U.S. data sent the precious metal falling too far.
Mounting tensions in Ukraine as well as Gaza also sent gold prices rising due to its safe-haven appeal.
On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at 1,303.30 a troy ounce during U.S. trading, up 0.97%, up from a session low of $1,291.20 and off a high of $1,303.70.
The August contract settled down 1.07% at $1,290.80 on Thursday.
Futures were likely to find support at $1,287.50 a troy ounce, Thursday’s low, and resistance at $1,319.00, Monday’s high.
Rising tensions in Ukraine sent gold prices rising on Friday.
The Pentagon said earlier that Russia may be set to provide more sophisticated weapons to Ukrainian separatists, which spooked investors, sending them to gold in search of safety.
Israel, meanwhile, rejected calls for a ceasefire and continued its ground offensive in Gaza, which also bolstered gold.
Separately, a spate of upbeat U.S. indicators sent gold prices falling to levels ripe for profit taking.
The relatively strong U.S. economic data primed market expectations for the Federal Reserve to wind down its bond-buying stimulus program around October and raise interest rates in 2015, which would reduce the need for gold for use as a hedge against loose monetary policy.
Crude futures moved lower in whipsaw trading on Friday, with upbeat U.S. data supporting the commodity with supply concerns pushing it back down.
n the New York Mercantile Exchange, West Texas Intermediate crude oil for delivery in September traded down 0.08% at $101.99 a barrel during U.S. trading. New York-traded oil futures hit a session low of $101.01 a barrel and a high of $102.53 a barrel.
The September contract settled down 1.02% at $102.07 a barrel on Thursday.
Nymex oil futures were likely to find support at $101.01 a barrel, the earlier low, and resistance at $103.45 a barrel, Tuesday’s high.
U.S. demand for long-lasting goods and appliance rose more than markets were expecting last month.
Upbeat durable goods and stronger than expected emplyment data supported oil by painting a picture of a more robust U.S. economy, one that will demand more fuel and energy going forward.
Elsewhere, reports of rising gasoline stocks at the U.S. oil hub in Cushing, Oklahoma, as well as news that European refineries are cutting runs or even idling plants due to an influx of oil products from the U.S. sent investors selling oil futures on concerns global supply remains ample, especially considering that disruption fears in war-torn Iraq and elsewhere in the Middle East never panned out.
Separately, on the ICE Futures Exchange in London, Brent oil futures for September delivery were up 1.02% and trading at US$108.17 a barrel, while the spread between the Brent and U.S. crude contracts stood at US$6.18 a barrel.
Natural gas futures dropped but remained range bound on Friday after updated weather-forecasting models called for mild temperatures to hover over portions of the heavily populated eastern half of the U.S. in the coming days.
On the New York Mercantile Exchange, natural gas futures for delivery in August traded at $3.782 per million British thermal units during U.S. trading, down 1.70%. The commodity hit a session high of $3.861 and a low of $3.765.
The August contract settled up 2.26% on Thursday to end at $3.847 per million British thermal units.
Natural gas futures were likely to find support at $3.744 per million British thermal units, Thursday’s low, and resistance at $3.886, Thursday’s high.
Forecasts for below-normal temperatures sent natural gas prices falling on Friday as investors sold on expectations for households to throttle back on their air conditioning.
In its Friday mid-day update, Natgasweather.com reported that cool snaps are expected this weekend and next week that will bring below-normal temperatures to much of the central and eastern U.S.
“This guarantees two more much larger than normal builds to come. A much warmer pattern will begin to set up after next week, but it will still be fairly active with areas of showers and thunderstorms over much of the U.S.,” Natgasweather.com reported.
“What will be the next area of focus regarding weather patterns is what happens after warming plays out during the first week of August. We still see enough weather and climate data to expect the northern U.S. to again battle cooler Canadian weather systems as they again attempt to track through the Midwest and Northeast.”
The bearish weather report wiped out gains stemming from Thursday’s bullish weekly inventory report.
The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended July 18 rose by 90 billion cubic feet, below expectations for an increase of 96 billion cubic feet.
The five-year average change for the week is an increase of 46 billion cubic feet.
Total U.S. natural gas storage stood at 2.219 trillion cubic feet. Stocks were 561 billion cubic feet less than last year at this time and 683 billion cubic feet below the five-year average of 2.902 trillion cubic feet for this time of year.