Investors expressed muted enthusiasm following strong corporate results
U.S. stock benchmarks closed out Friday, 27 April 2018 little changed, and booked modest losses, as investors expressed muted enthusiasm following strong corporate results, even from some of the market's biggest and most influential companies. Three large-capitalization internet and technology companies reported better-than-expected results, and while the stocks mostly gained in response, they ended well off their highs and the advances didn't spark a broader rally. A tepid earnings report from energy giant Exxon Mobil, along with data indicating a decelerating rate of economic growth, also capped the buying mood.
The Dow Jones Industrial Average fell 11.15 points, or less than 0.1%, to 24,311.19. The S&P 500 index closed up 2.97 points to 2,670.91, a gain 0.1%. The Nasdaq Composite Index inched up by 1.12 point to 7,119.80, virtually unchanged.
For the week, the Dow fell 0.6% and the Nasdaq lost 0.4%. The S&P closed down a mere 0.01%, however, that was enough for all three to post their first weekly decline of the past three.
Seven S&P 500 sectors finished Friday in positive territory, while four groups finished in the red. Energy was by far the weakest group, suffering from Exxon's disappointing earnings, while telecom services led to the upside following a Reuters report that a merger deal between Sprint and T-Mobile could be struck in the next three days.
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The major averages ended Friday little changed despite strong earnings reports from Amazon, Microsoft, and Intel. Amazon shares soared at the opening bell, adding nearly 8.0%, after the internet retail giant reported blowout first quarter results easily beating both top and bottom line estimates and raised its profit guidance for the second quarter. Microsoft and Intel shares went through a similar experience after both companies reported better-than-expected quarterly results; In other earnings news, energy heavyweight Chevron beat earnings estimates for the first quarter, but its peer Exxon Mobil missed the mark.
U.S. Treasuries rallied for the second day in a row on Friday, sending the benchmark 10-yr yield three basis points lower to 2.96%.
The Bank of Japan kept interest rates unchanged, as expected, but removed from its policy statement a reference to reaching its 2.0% inflation target in fiscal year 2019/2020.
Reviewing Friday's economic data, which most notably included the preliminary reading of first quarter GDP; investors also received the first quarter Employment Cost Index and the final reading of the University of Michigan Consumer Sentiment Index for April.
Latest data showed that a reading on gross domestic product in the first quarter showed slowing growth, but not as much as Wall Street expected, as businesses stepped in where consumer spending cooled. A separate report could prove more sensitive for inflation-wary marketsit showed worker compensation rising at the fastest pace since 2008. The cost of labor rose 0.8% in first quarter, to bring yearly gain to 2.7%. First quarter GDP increased at an annualized rate of 2.3%. That was above the consensus estimate of 2.1%, yet it was a deceleration from the fourth quarter growth rate of 2.9%. The key takeaway from the report is that consumer spending was weak in the first quarter, increasing just 1.1% after increasing 4.0% in the fourth quarter. Real final sales, which exclude the change in inventories and are often viewed as the better gauge of growth, were up only 1.9% versus the prior ten quarter average of 2.2%. The first quarter Employment Cost Index rose 0.8%, while the consensus expected an increase of 0.7%.
Meanwhile, the final reading of the University of Michigan consumer sentiment index was 98.8, up from the initial reading of 97.8 but still below March's level of 101.4.
Concerns over rapidly rising U.S. interest rates were still hanging over markets, as the yield on 10-year Treasury notes recently traded at its highest since January 2014, pushing above the closely watched 3% line, in part of rising inflation concerns. On Friday, it stood at 2.961%. Rising Treasury yields tend to dull demand for nonyielding bullion, at least in the short term.
The ICE U.S. Dollar Index was up 0.1% at 91.8. Its moves can influence appetite for dollar-priced commodities, including the yellow metal, to investors using other currencies.
Bullion prices ended mixed at Comex on Friday, 27 April 2018. Gold prices took back some ground after a two-session skid as financial markets assessed the merits of Korea peace efforts and the first reading of first-quarter GDP, which came in slightly better than expected. Silver prices slipped. Gains for the yellow metal came even as a leading dollar measure also rose, with a pullback in the yield for the benchmark 10-year Treasury giving the commodity, which doesn't offer a yield some ground to rise.
June gold finished $5.50, or 0.4%, higher at $1,323.40 an ounce, bouncing off its lowest closing level since March 20. June gold notched a 1.1% drop for the week as rising rates weighed on bullion.
May silver lost 8.5 cents, or 0.5%, to settle at $16.406 an ounce. July silver which is now the most-active contract, shed 7 cents, or 0.4%, at $16.497. For the week, the May contract for silver declined by 4.6%, while the July contract fell by 4.2%.
Crude oil futures were mixed on Friday, 27 April 2018 with their downside limited by market expectations the U.S. will abandon the Iran nuclear deal, leading the way for renewed sanctions on Tehran and the country's energy exports. Crude saw little movement in afternoon trade after oil-field services firm Baker Hughes said the number of U.S. oil rigs rose by 5 this week to 825.
June West Texas Intermediate crude fell 9 cents, or 0.1%, to end at $68.10 a barrel on the New York Mercantile Exchange, leaving it down 0.4% for the week. Global benchmark July Brent fell 9 cents to end at $73.79 a barrel on ICE Futures Europe. The price of Brent earlier this week breached the symbolic $75-a-barrel threshold for the first time since late 2014.
The prospect of the U.S. abandoning the nuclear deal is among several factors cited for a rally that is lifted the U.S. benchmark from a 2018 low just below $60 a barrel in mid-February to a nearly 3 1/2-year high shy of $70 a barrel this month. Strong global demand and efforts by the Organization of the Petroleum Exporting Countries, or OPEC, to limit production have also played a role, offsetting growing output by U.S. shale producers.
On Monday, investors will receive Personal Income (consensus +0.4%), Personal Spending (consensus +0.4%), and PCE Prices (consensus 0.0%) for March, the Chicago PMI for April (consensus 58.0), and March Pending Home Sales (consensus +1.5%).
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