By Anora Mahmudova and Wallace Witkowski, MarketWatch
U.S. GDP grows at sluggish 1.2%
The S&P 500 index hit a record in intraday trading Friday as
U.S. stocks shook off earlier concerns about sluggish
second-quarter domestic growth, but the Dow industrials remained in
negative territory.
Analysts said a rebound in oil prices might be driving a modest
bounce in equities. Oil for September delivery
(http://www.marketwatch.com/story/crude-oil-enters-bear-market-after-losing-41-handle-2016-07-29)
settled up 1.1% to $41.60 a barrel.
"None of the data that came out earlier were good and there
wasn't any company-specific news that would lift the markets,
instead it's the tractor beam of oil that is pushing equities
higher," said Kim Caughey Forrest, senior analyst and portfolio
manager at Fort Pitt Capital Group.
Earlier, disappointing economic data weighed on sentiment. The
U.S. economy grew at a slower pace than expected in the second
quarter. The tepid 1.2% annual growth rate was due to a large
decline in business investment
(http://www.marketwatch.com/story/second-quarter-gdp-rises-just-12-well-below-forecast-2016-07-29),
according to the Commerce Department. Meanwhile, first-quarter
growth was also reduced to a 0.8% annual rate from the prior
estimate of a 1.1% gain.
The S&P 500 index gained 3 points, or 0.1%, to trade at
2,173, after reaching a new all-time intraday high of 2,177.13. The
telecom and utilities sectors led the gains. The energy sector,
which was down more that 1% in early trade, swung to a 0.4% gain.
The benchmark index is on track to finish the week at a fractional
loss and post a 3.5% gain over the month.
The Dow Jones Industrial Average was off 32 points, or 0.2%, at
18,424, weighed down by a decline in Exxon Mobil Corp.(XOM) shares.
The blue-chip index is set to post weekly losses, but still end the
month 2.8% higher.
The Nasdaq Composite was up 5 points, or 0.1%, to 5,160. The
tech-heavy index was set for an 6.6% advance for the month and a
1.2% gain for the week.
Economic news: The first estimate of second-quarter gross
domestic product
(http://www.marketwatch.com/story/us-second-quarter-gdp-increases-at-sluggish-12-annual-rate-2016-07-29)came
in at a sluggish 1.2% annual rate, far below expectations for a
2.6% pace. Lackluster growth could derail the Federal Reserve's
intentions to raise interest rates at a gradual pace.
Second-quarter business inventories contracted for the first
time since 2011. Meanwhile, the employment cost index rose
0.6%.
Joseph Lake, economist at The Economist Intelligence Unit, noted
even as the headline numbers looked weak, the details show the U.S.
economy is healthier than it appears.
"Private consumption grew by a whopping 4.2% in the second
quarter, and given the importance of the American consumer to the
world right now, that is a big relief," Lake wrote in emailed
comments.
"The economy is chugging along in a fairly steady recovery,
creating plenty of jobs, but failing to quicken to a pace that
would leave the Fed feeling comfortable enough to remove more of
its support," Lake said, adding that he does not expect rate
increases this year.
A measure of Chicago-area economic activity retreated only
slightly in July after a strong gain in the prior month. Consumer
sentiment weakened in July as politics and the economy weighed on
most Americans, the University of Michigan said Friday.
Earlier, disappointment over Bank of Japan's latest easing
action also weighed on sentiment.
The BOJ made no changes to interest rates
(http://www.marketwatch.com/story/bank-of-japan-oks-more-stimulus-keeps-rate-steady-2016-07-29)
or to its bond-buying program. However, the central bank did
increase its purchase of exchange-traded funds to Yen6 trillion
($57 billion) annually from Yen3.3 trillion previously.
Read:Is Bank of Japan signaling that it's running out of ammo?
(http://www.marketwatch.com/story/is-bank-of-japan-signaling-that-its-running-out-of-ammo-2016-07-29)
Federal Reserve speakers:San Francisco Fed President John
Williams
(http://www.marketwatch.com/story/feds-williams-says-hes-not-concerned-about-a-recession-2016-07-29-11103730)said
Friday he wasn't worried about a greater risk of a recession in the
U.S. economy even though the economy is in its eighth year of
expansion.
Dallas Fed President Rob Kaplan is scheduled to speak at the
Independent Bankers Association of New Mexico at 1 p.m.
Eastern.
Full speed on earnings: Cigna Corp.(CI) kicked off another busy
day of corporate results, sliding 5% after the health care insurer
significantly missed on earnings.
Merck & Co. Inc.(MRK) climbed 0.4% following an earnings
beat
(http://www.marketwatch.com/story/mercks-profit-and-revenue-rise-above-expectations-2016-07-29).
AbbVie Inc.(ABBV) gained 2.1% after raising its full-year
adjusted earnings outlook.
Xerox Corp.'s(XRX) shares rose 1.8% after profit rose more than
expected
(http://www.marketwatch.com/story/xerox-profit-rises-beats-expectations-2016-07-29).
Exxon Mobil Corp.(XOM) fell 1.8% after the company's
second-quarter profit and revenue fell short of analyst estimates
(http://www.marketwatch.com/story/exxon-mobil-shares-fall-26-premarket-after-company-misses-on-profit-and-revenue-2016-07-29).
Chevron Corp.(CVX) rose fractionally after the company swung to
a loss for the second quarter as it booked impairment and other
charges.
United Parcel Service Inc.(UPS) shares fell 0.7% after the
shipping company reported earnings in line with expectations.
Shares of Alphabet Inc.(GOOGL) rose 4.3% after the Google-parent
late Thursday reported earnings and revenue well above Wall Street
expectations
(http://www.marketwatch.com/story/googles-alphabet-shares-hit-intraday-record-high-after-earnings-2016-07-28).
Amazon.com Inc. (AMZN) shares rose 0.8% after the company had
reported earnings that beat estimates
(http://www.marketwatch.com/story/amazon-posts-huge-quarterly-beat-but-very-wide-operating-income-outlook-2016-07-28)
late Thursday.
Shares of Western Digital Corp.(WDC) dropped 12% after the
computer storage company late Thursday swung to a loss in the
latest quarter
(http://www.marketwatch.com/story/western-digital-posts-a-loss-but-tops-forecasts-2016-07-28-16485455).
Expedia Inc.(EXPE) slumped 3% after reporting earnings late
Thursday.
Other markets: European markets marched higher
(http://www.marketwatch.com/story/european-stocks-advance-as-bank-shares-move-higher-ahead-of-stress-tests-2016-07-29),
with banks leading the charge north ahead of stress-test results
from the European Banking Authority
(http://www.marketwatch.com/story/europe-stress-test-results-to-put-spotlight-on-italys-troubled-banks-2016-07-28),
due after the market close. Japan's Nikkei 225 index initially
declined, but ended the day 0.6% higher
(http://www.marketwatch.com/story/asian-markets-cautious-as-investors-await-word-from-bank-of-japan-2016-07-28).
Gold prices rose 1.2% to $1,357.50 an ounce
(http://www.marketwatch.com/story/gold-pops-higher-after-weak-us-gdp-data-2016-07-29),
for a 2.8% gain in July.
The ICE dollar index fell 1.2% to 95.57.
--Sara Sjolin in London contributed to this article.
(END) Dow Jones Newswires
July 29, 2016 14:58 ET (18:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.