Stocks Close Lower On The Day But Higher For The Week – U.S. Commentary

After moving notably higher over the past few sessions, stocks gave back some ground during the trading day on Friday. The major averages initially moved to the upside but pulled back into negative territory as the session progressed.

The major averages ended the day in the red but well off their lows of the session. The Dow fell 109.91 points or 0.4 percent to 25,270.83, the Nasdaq slumped 77.06 points or 1 percent to 7,356.99 and the S&P 500 slid 17.31 points or 0.6 percent to 2,723.06.

Despite the pullback on the day, the major averages moved significantly higher for the week. The Nasdaq surged up by 2.6 percent, while the Dow and the S&P 500 both jumped by 2.4 percent.

The downturn on Wall Street was led by Apple (AAPL), with the tech giant tumbling by 6.6 percent to a nearly three-month closing low.

The steep drop by Apple came after the company reported fiscal fourth quarter earnings and revenues that exceeded estimates but weaker than expected iPhone shipments.

Apple also forecast fiscal first quarter revenues of $89 to $93 billion, with the midpoint below the consensus estimate of $93 billion.

The pullback by the major averages also came as traders digested a closely watched Labor Department report showing stronger than expected job growth in the month of October.

The Labor Department said non-farm payroll employment surged up by 250,000 jobs in October after rising by a downwardly revised 118,000 jobs in September. Economists had expected an increase of about 190,000 jobs.

The report also said the unemployment rate in October was unchanged from the previous month at 3.7 percent, its lowest level since hitting 3.5 percent in December of 1969.

Average hourly employee earnings rose by $0.05 to $27.30 in October, reflecting a 3.1 percent increase compared to the same month a year ago.

The annual rate of hourly earnings growth accelerated from 2.8 percent in September, reaching the fastest pace since April of 2009.

The upbeat jobs data paints of positive picture for the U.S. economy but also led to renewed concerns about the outlook for interest rates.

“The U.S. jobs market remains incredibly strong and with wages starting to accelerate, domestic price pressures will increase,” said ING Chief International Economist James Knightley.

He added, “This will keep the Federal Reserve on its path of ‘gradual’ interest rate hikes with next week’s FOMC meeting set to signal a December move.”

Traders also kept an eye on conflicting reports about the likelihood of a trade deal between the U.S. and China ahead of meeting between President Donald Trump and Chinese President Xi Jinping later this month.

Sector News

Natural gas stocks moved sharply lower over the course of the trading session, dragging the NYSE Arca Natural Gas Index down by 2.1 percent.

Within the natural gas sector, Newfield Exploration (NFX) pulled back sharply after jumping on Thursday after agreeing to be acquired by Encana (ECA) in an all-stock transaction valued at approximately $5.5 billion.

Significant weakness was also visible among semiconductor stocks, as reflected by the 1.5 percent slump by the Philadelphia Semiconductor Index. The index gave back ground after moving notably higher over the past few sessions.

Oil stocks also moved notably lower amid a continued decrease by the price of crude oil. Crude for December delivery slid $0.55 to $63.14, the lowest closing level for a front-month contract since April.

Pharmaceutical and commercial real estate stocks also moved to the downside on the day, while telecom and steel stocks saw considerable strength.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved sharply higher during trading on Friday. Japan’s Nikkei 225 Index shot up by 2.6 percent, while Hong Kong’s Hang Seng Index spiked by 4.2 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index fell by 0.3 percent, the French CAC 40 Index and the German DAX Index rose by 0.3 percent and 0.4 percent, respectively.

In the bond market, treasuries moved notably lower following the upbeat employment data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 7 basis points to 3.214 percent.

Looking Ahead

Results of Tuesday’s midterm elections may impact next week’s trading, with Democratic leaders optimistic they can retake control the House.

Traders are also likely to keep an eye on the Federal Reserve’s latest monetary policy decision due to be announced next Thursday.

The Fed is widely expected to leave interest rates unchanged, although the accompanying statement may provide clues about the anticipated rate hike next month.

The election results and Fed meeting may overshadow reports on service sector activity, producer price inflation and consumer sentiment.

CVS Health (CVS), Eli Lilly (LLY), Ralph Lauren (RL), Wendy’s (WEN), Groupon (GRPN), Humana (HUM), Office Depot (ODP), News Corp. (NWSA), Qualcomm (QCOM), Disney (DIS), and Yelp (YELP) are among a slew of companies due to report their quarterly results next week.

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