By Anora Mahmudova and Victor Reklaitis, MarketWatch
Shares of energy giants Exxon Mobil, Chevron slump after
earnings misses
U.S. stocks switched between small gains and losses Friday, held
in check by disappointing earnings from energy giants Exxon Mobil
and Chevron.
Investors also were debating whether fresh data on weak wage
growth could prompt the Federal Reserve to think twice about
raising interest rates in September.
"While weak data suggest the Fed might be patient with rate
hikes, the other side of this story is that the economy is not
growing as fast as we would hope," said Quincy Krosby, market
strategist at Prudential Financial.
The S&P 500 was flat at 2,108. The S&P 500 energy sector
dropped nearly 2%, leading the losses on the main benchmark.
The Dow Jones Industrial Average was off by 27 points, or 0.2%,
at 17,718. The Nasdaq Composite added 10 points, or 0.2%, to
5,138.
The main indexes looked on track to record modest weekly and
monthly gains.
Another focus of investors is second-quarter earnings. Reports
so far this season have on the whole beaten estimates, but revenue
and earnings growth have nonetheless been weak.
What strategists are saying: "The last data I saw from FactSet
showed that 75% of S&P 500 companies that have reported have
topped estimates, better than the 63% historical average, but
earnings for the first half of the year are still on pace to
actually contract by 0.7%, which would be the first year-over-year
decline in the first half of a year since 2009," wrote Andrew
Adams, chief market technician at Raymond James.
"As a result, we have not seen the market pop typically expected
whenever such a large percentage of companies is topping estimates,
and with stocks peaking the past two days at the 2110 level, it
appears that level is the first hurdle to overcome before the prior
high can be threatened," Adams wrote.
Other markets: Chinese stocks closed lower and notched their
biggest monthly drop in nearly six years
(http://www.marketwatch.com/story/china-shares-headed-for-worst-month-in-over-two-years-2015-07-31),
while European equities seesawed but were poised for weekly and
monthly gains
(http://www.marketwatch.com/story/european-stocks-nudge-higher-ahead-of-inflation-data-2015-07-31).
Oil prices fell on Friday, with the commodity set to post its
worst monthly showing of the year
(http://www.marketwatch.com/story/crude-poised-for-worst-monthly-performance-of-2015-2015-07-31)
so far. Gold futures were also lower, and the dollar
(http://www.marketwatch.com/story/dollar-dips-versus-yen-euro-ahead-of-us-data-2015-07-31)weakened
(http://www.marketwatch.com/story/dollar-dips-versus-yen-euro-ahead-of-us-data-2015-07-31).
Economic reports: The wages and benefits that companies,
governments and nonprofit institutions pay their employees rose a
record-low 0.2% in the second quarter, according to the employment
cost index released by the Labor Department on Friday. That was
well below the 0.7% gain in the first quarter and came as a
surprise to economists surveyed by MarketWatch, who had expected a
0.6% gain.
"Wage costs data are very important for the Federal Reserve, as
they would really like to see inflation to start going higher. But
deceleration in wage growth suggests otherwise. At this point,
nobody is sure what to do about the rates, neither the Fed nor the
market," Krosby said.
Separately, Chicago PMI rose in July to the highest level since
January, suggesting a pickup in business during the summer.
Read:Sharp deceleration in employment costs gives Fed a reason
to delay rate hike
(http://www.marketwatch.com/story/sharp-deceleration-in-employment-costs-gives-fed-a-reason-to-delay-rate-hike-2015-07-31)
Movers & Shakers: Exxon Mobil Corp. (XOM) shares dropped
4.6% after the biggest U.S. oil company reported a 52% drop in
profit for its second quarter
(http://www.marketwatch.com/story/exxon-mobil-earnings-halved-by-lower-oil-price-2015-07-31),
as higher profit from its refining and chemical operations couldn't
offset plunging earnings in its exploration and production business
amid lower crude prices.
Chevron Corp. (CVX) slumped 4.2% after the oil giant reported a
sharp decline in second-quarter profit and sales
(http://www.marketwatch.com/story/chevrons-profit-plunges-on-low-oil-price-2015-07-31),
hurt by lower crude prices and one-time charges.
Coca-Cola Enterprises Inc. (CCE) jumped 12% following news it is
in merger talks with other Coke bottlers
(http://www.marketwatch.com/story/coca-cola-enterprises-in-advanced-talks-over-tie-up-with-other-coke-bottlers-2015-07-31).
Expedia Inc. (EXPE) was another big S&P advancer, surging
10% after its quarterly earnings topped forecasts
(http://www.marketwatch.com/story/expedia-profit-tops-expectations-2015-07-30-174852319)
late Thursday.
Royal Caribbean Cruises Ltd.(RCL) surged 8.3% after raising its
earnings outlook for the year
(http://www.marketwatch.com/story/royal-caribbean-boosts-outlook-as-profit-beats-2015-07-31).
Hanesbrands Inc. (HBI) fell 11% after quarterly revenue missed
estimates
(http://www.wsj.com/articles/hanesbrands-misses-estimates-on-revenue-1438294406).
Read more in the Movers & Shakers column
(http://www.marketwatch.com/story/exxon-mobil-chevron-royal-caribbean-earnings-in-focus-2015-07-30)
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