The S&P 500 and Dow ended higher on Friday but posted losses for the week as Nvidia and other chip names had a particulary rough day.
The S&P 500 (^GSPC) rose 0.22%, or 5.95 points, as of market close Friday. The Dow (^DJI) rose 0.49%, or 123.95 points, jumping after Trump suggested Friday afternoon that he was hopeful that the US and China could strike a deal on trade, if the agreement is reciprocal. However, the S&P 500 fell 1.6% for the week, and the Dow posted a weekly loss of more than 2%.
The Nasdaq (^IXIC) fell 0.15%, or 11.16 points Friday, and is down about 2.1% for the week. The index spent most of Friday in the red as steep losses from shares of chipmaker Nvidia pulled peer semiconductor stocks lower.
US crude oil prices advanced for the third day in a row but still ended the week lower by about 6%. Prices for U.S. crude (CL=F) settled at $56.46 on Friday, marking the commodity’s sixth consecutive week of declines.
‘Big Oil equities appear likely to remain in a holding pattern’
“Part of the recent weakness in crude oil prices can be blamed on decelerating global growth expectations in 2019/2020,” Wells Fargo analysts wrote in a note Friday. “The biggest near-term wildcard in the economic outlook is the trade dispute between China in the US. A favorable resolution to this impasse would be positive for global GDP and oil prices, in our view.”
The analysts added that “Big Oil equities appear likely to remain in a holding pattern until the OPEC meeting concludes on December 6, 2018,” referring to the upcoming meeting in Vienna. “The important number to watch in the coming OPEC meeting is for cuts totaling or exceeding 1.1 mmbpd.”
Earlier this week, OPEC and its partners were reported to have been considering a proposal to cut oil output by 1.4 million barrels per day, a higher quantity than previously anticipated.
Broad declines in commodities are one another signal that a downturn in global growth may be spilling over to the US. This comes amid a flurry of other factors that could impact growth, including the specter of rising interest rates, increasing US debt and annual budget deficits and projections of decelerating earnings for US companies.
‘I think US markets really are at a crossroads’
“I think US markets really are at a crossroads,” said John Linehan, chief investment officer of equity at T. Rowe Price, during a briefing this week in New York. “There are very significant reasons to be confident about the market but some real reasons to see that there’s some risks that pose a very clear and present danger.”
Brian Belski, chief investment strategist for BMO Capital Markets, notes that outlook is broadly negative for stocks, even in the wake of one of the longest-running bull markets for equities in history. BMO’s base case target for the S&P 500 is 3,150 for the end of 2019.
“The February correction still represents the only official correction for the S&P 500 in nearly three years despite the bears’ best efforts in October,” Belski wrote in BMO’s 2019 market outlook released Friday. “However, we continue to believe the resounding emotion of investors is doubt relative to faith. For instance, while some select areas of the market have certainly enjoyed froth and euphoria, equities are much more hated than loved, in our view.”
US equities have seen net outflows so far in 2018, Belski adds, while bonds have “actually outperformed during long stretches over the past year while enjoying inflows.”
Meanwhile, Sterling (GBPUSD=X, GBPEUR=X) turned around and fell against the dollar Friday as investors digest the political uncertainty in the U.K., with Prime Minister Theresa May struggling to convince lawmakers to support her Brexit draft plan with the European Union. A series of high-profile resignations, including the departure of Brexit minister Dominic Raab, rattled investor sentiment earlier in the week, sending the pound tumbling.
STOCKS: Nvidia reports results that missed Wall Street estimates
Nvidia (NVDA) offered investors a weak sales forecast for the current quarter and reported third-quarter fiscal 2019 results that fell short of consensus expectations. Shares fell as much as 19% in extended trading. Adjusted earnings were $1.84 per share on revenue of $3.18 billion, short of expectations of earnings of $1.92 per share on revenue of $3.24 billion, according to Bloomberg-compiled estimates. The chipmaker is expecting $2.7 billion in revenue for the fiscal fourth quarter, plus or minus 2%, excluding some items, falling short of estimates of $3.4 billion. The disappointing results and forecasts were due in large part to weakness in the company’s cryptocurrency mining products, which have continued to decline. Shares of Nvidia fell 18.76% to $164.43 per share as of market close. Peer chip stocks also declined, with the Philadelphia Semiconductor Index (SOXX) falling 1.21% Friday.
Media giant Viacom (VIAB) topped analyst expectations for fourth-quarter earnings and revenue, lifted by increases in fees paid by affiliates and studio revenue. Net earnings per share came in at 98 cents versus the Street’s consensus estimates of 95 cents, and revenue of $3.49 billion outpaced the $3.37 billion expected by analysts. Studio revenue rose to $984 million for the quarter following Paramount Pictures box office successes “Mission Impossible – Fallout” and “A Quiet Place.” Total affiliate revenue grew 4% in the quarter. Shares of Viacom rose 3.64% to $32.99 per share as market close.
BlackBerry (BB) is acquiring Cylance, an artificial intelligence and cybersecurity company, for $1.4 billion in an all-cash deal, according to a statement Friday. The deal helps BlackBerry, which has pivoted from functioning as a smartphone device-maker to expanding in the enterprise software space, grow out its cybersecurity capabilities and build its BlackBerry Spark IoT platform. Shares of BlackBerry Limited rose 1.3% to $8.98 per share as of market close.
NEWS: Facebook reels after explosive NYT report
Facebook (FB), still struggling from the fallout of a massive data scandal surrounding the 2016 presidential election, isn’t out of the trenches yet. The company suffered its latest blow following a New York Times exposé reporting that the social networking platform went on the offensive to discredit those who criticized the way it handled the disinformation. The report prompted Facebook’s board to issue a statement Thursday that it “did indeed push (Facebook’s executives) to move faster,” to respond to Russian interference, while claiming that suggesting management “knew about interference and either tried to ignore it or prevent investigations into what had happened is grossly unfair.” Sheryl Sandberg, Facebook’s Chief Operating Officer and the subject of much of the New York Times’ report, called the article “simply untrue” in a statement Thursday night.
Shares of Facebook fell 3% to $139.53 per share as of market close Friday.
ECONOMY: Industrial production increased at slower-than-expected rate in October
US industrial production rose 0.1% month-over-month in October, the Federal Reserve said in its monthly report Friday. Consensus estimates had been for a 0.2% increase in industrial production in October, according to Bloomberg data. Advances in manufacturing production helped offset declines in the mining and utilities sectors, but the headline rate of 0.1% still represents a slowdown from the 0.2% pace of increase seen in September.
“Hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month,” the Federal Reserve said in a statement.
Capacity utilization for the industrials sector was 78.4% in October, 1.4 percentage points below the average between 1972 and 2017. The results came in 20 basis points higher than consensus estimates capacity utilization in October, according to Bloomberg data.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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