Wall Street closed lower on Friday following weak performance of technology sector on trade concerns. Moreover, China reported weak economic data for May despite the fact that U.S. economic data remained strong. All three major stock indexes ended in the red. However, for the week as a whole, the Dow, S&P 500 and Nasdaq Composite posted gains.
The Dow Jones Industrial Average (DJI) fell 0.1% to close at 26,089.61. The S&P 500 declined 0.2% to close at 2,886.98. Meanwhile, the Nasdaq Composite Index closed at 7,796.66, losing 0.5%. The fear-gauge CBOE Volatility Index (VIX) decreased 3.4% to close at 15.28. A total of 5.85 billion shares were traded on Friday, lower than the last 20-session average of 6.83 billion. Decliners outnumbered advancers on the NYSE by a 1.53-to-1 ratio. On Nasdaq, a 1.79-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow closed in negative territory with 17 components of the 30-stock blue-chip index closing in the green while thirteen finished in the red. The S&P 500 also closed in the red.The Utilities Select Sector SPDR (XLU) gained 1.1% while Technology Select Sector SPDR (XLK) dropped 0.9%. Notably, six out of 11 sectors of the benchmark index closed in the green while five ended in the red. Moreover, tech-heavy Nasdaq Composite ended in negative territory due to weak performance by trade-sensitive large-cap stocks.
Broadcom Pulls Down Technology Sector
Semiconductor major Broadcom Inc. AVGO missed its fiscal second-quarter 2019 revenue estimate. The company reported total revenue of $5.517 billion while the Zacks Consensus Estimate Was $5.663 billion. The company also lowered its fiscal 2019 revenue estimate to $22.5 billion from $24.5 billion provided earlier. Management cited trade conflict with China and restriction on Huawei to do business with U.S. companies are major reason for weak result. (Read More)
Consequently, share of Broadcom plunged 5.6%. Moreover, shares of other semiconductor giants like Micron Technology Inc. MU and Advanced Micro Devices Inc. AMD plummeted 2.2% and 3.3%, respectively. Advanced Micro Devices carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Slowdown in China
The National Bureau of Statistics of China reported that value-added industrial output rose 5.0% in May compared with 5.4% in April, This was the lowest growth rate in 17 years. Fixed-asset investment outside Chinese rural households climbed 5.6% in the January-May year over year. However, growth rate for January-April period was 6.1% annually. Moreover, unemployment remained flat at 5%.
U.S. Economic Data
The Department of Commerce reported that retail sales increased 0.5% in May missing the consensus estimate of a growth of 0.7%. Moreover, retail sales in April were revised to a gain of 0.3% from a loss of 0.2%. The core retail sales excluding auto sales were also up 0.5% in May. Core retail sales of April were also revised to a gain of 0.4% from unchanged reported earlier.
Sales at auto dealerships accelerated 0.7% in May after declining 0.5% in April. Receipts at service stations climbed 0.3%. Building materials and garden equipment sales inched up 0.1%. Online and mail-order purchases surged 1.4%. Sales at bars and restaurants grew 0.7% in May.
Industrial production increased 0.4% in May surpassing the consensus estimate of 0.2%. Importantly, the manufacturing output rose 0.2%, marking its first monthly gain in 2019. Capacity utilization rose to 78.1% in May, mostly in line with the consensus estimate.
For the week, all three major stock indexes --- the Dow, S&P 500 and Nasdaq Composite --- gained 0.4%, 0.5% and 0.7%, respectively. The market remained volatile as some economic data were tepid while some were rosy. Moreover, trade conflict with China continued with no signs of improvement. However, investors are expecting a rate cut or at least an indication of a rate cut in the next month from Fed. The central bank will meet in June 18-19 to take a decision about market interest rate.
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