MARKET SNAPSHOT: Stocks Steady Mid-session Friday As Investors Ponder Corporate Earnings, Fed Rate Cuts And U.S-China Trade D...
July 19 2019 - 12:37PM
Dow Jones News
By Clive McKeef
Microsoft shares rally after earnings beat
U.S. stocks were little changed mid-session Friday, with Wall
Street hopeful that the Federal Reserve will take aggressive action
to stamp out signs of stress in the economy, while digesting mixed
corporate earnings reports against the backdrop of the unresolved
U.S.- China trade dispute.
The S&P 500 index rose back above 3,000 level in early
trade, but all three benchmarks look likely to end slightly lower
for the week.
How are the major benchmarks performing?
The Dow Jones Industrial Average was up 78 points at 27,301,
while the S&P 500 index was up 2.4 points to 2,997, and the
Nasdaq Composite index up 10 points at 8,217.
What's driving the market?
Good earnings from the heavyweights like Microsoft Corp.
(http://www.marketwatch.com/story/microsoft-earnings-jump-nearly-50-to-destroy-expectations-stock-heads-higher-2019-07-18)(MSFT)
are helping to bolster equity markets. Microsoft
(http://www.marketwatch.com/story/microsoft-earnings-jump-nearly-50-to-destroy-expectations-stock-heads-higher-2019-07-18)blew
away earnings
(http://www.marketwatch.com/story/microsoft-earnings-jump-nearly-50-to-destroy-expectations-stock-heads-higher-2019-07-18)expectations
late Thursday thanks to strong growth from its Azure cloud offering
and LinkedIn.
And the likelihood of a Federal Reserve interest rate cut at its
policy meeting July 30-31 remained in focus Friday after both New
York Fed president John Williams
(http://www.marketwatch.com/story/new-york-fed-downplays-williamss-speech-calling-it-academic-and-not-about-july-policy-meeting-2019-07-18)
and Fed board vice-chair Richard Clarida
(http://www.marketwatch.com/story/feds-clarida-echoing-williams-says-cutting-interest-rates-quickly-is-a-good-strategy-2019-07-18)
said Thursday that central banks should act pre-emptively on signs
of economic growth slowing.
Analysts have now moved from debating whether Fed will lower
rates in July to how much the central bank will ease
(https://www.wsj.com/articles/july-data-throw-size-of-first-fed-rate-cut-into-doubt-11563451200).
The probability of a 50 basis point cut in the federal funds rate
in late July rose to 43% from 23% a week ago according to CME
FedWatch.
Globally other central banks have also been easing monetary
policy again too, with 18 interest rate cuts in the past six
months, according to Bank of America Merrill Lynch. BlackRock's CEO
Larry Fink told CNBC Friday
(http://www.marketwatch.com/story/head-of-worlds-largest-asset-manager-says-taking-risk-off-the-table-in-stocks-is-a-mistake-2019-07-19)that
stocks should rise further, despite new record highs being hit only
last week, given the support from easier monetary policy
currently.
But now that earnings reports are in for the largest 10 U.S.
banks, investors expect some trouble from likely interest-rate cuts
by the Federal Reserve.
(http://www.marketwatch.com/story/big-banks-earnings-reports-point-to-near-term-pain-and-long-term-opportunity-2019-07-19).
Banks remain strongly capitalized, with earnings-per-share growth
benefiting from share buybacks but looking ahead, profits are
expected to be pressured by declining interest rates.
The U.S - China trade dispute remains on the markets worry
list.. U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Mnuchin spoke with their Chinese counterparts by phone on
Thursday
(https://www.reuters.com/article/us-usa-trade-china/u-s-china-officials-discuss-trade-mnuchin-eyes-possible-in-person-talks-idUSKCN1UD1LU)
but there was little sign of progress in the talks. The U.S.
technology industry is lobbying the Trump administration for
permission to supply Huawei
(https://www.washingtonpost.com/business/2019/07/19/us-tech-companies-push-trump-allow-some-sales-huawei/?noredirect=on&utm_term=.e32064aed0e5)
and several large semiconductor companies have recently made formal
requests to Commerce Department.
The market is also keeping an eye on the prospects for a deal to
raise the federal government's debt ceiling before the U.S.
Treasury starts to run out of cash to pay it's bills in September
without more borrowing. The White House and congressional leaders
reportedly reached an agreement
(https://www.bloomberg.com/news/articles/2019-07-19/white-house-sends-pelosi-spending-cut-options-for-debt-deal?srnd=premium)
on defense and welfare spending levels in a two-year deal to raise
spending caps along with debt ceiling, but have yet to agree on the
offsetting cuts to other parts of the budget that the White House
is demanding.
Geopolitical risks are a concern also as tensions continue to
simmer in the Middle East. President Trump said Thursday that US
destroyed an Iranian drone
(http://www.marketwatch.com/story/strait-of-hormuz-oil-choke-point-in-focus-as-trump-says-us-downed-iranian-drone-2019-07-18)that
approached USS Boxer near Strait of Hormuz. Regional tensions
remain high following recent attacks on cargo ships, Iran's
shooting down of a US drone, and British seizure of an Iranian oil
tanker.
Which stocks are in focus?
Microsoft (MSFT) was up after it topped analysts' estimates.
Analysts found little to complain about following Microsoft Corp.'s
latest earnings report,
(http://www.marketwatch.com/story/microsoft-stock-hits-another-record-high-on-belief-that-big-growth-is-far-from-over-2019-07-19)
as the software and cloud giant once again topped expectations and
its shares hit a new intraday high in Friday trading.
Boeing Co.'s stock (BA) was in focus after the aeronautics and
defense contractor said it would take a $4.9 billion second-quarter
charge related to its 737 Max groundings.
BlackRock Inc. (BLK) reported second-quarter earnings
(http://www.marketwatch.com/story/blackrocks-stock-slips-after-profit-and-revenue-fall-below-expectations-2019-07-19)and
revenue that fell below expectations, as the investment management
and advisory company said it had lower base fees as a result of
lower securities and lending revenue and lower performance
fees.
Shares of American Express Co. (AXP) fell after the
payment-processing company reported second-quarter earnings
(http://www.marketwatch.com/story/american-expresss-stock-edged-up-after-profit-rises-above-expectations-dividend-boost-2019-07-19)
and revenue that slightly surpassed expectations. The stock has
rallied 33.2% year-to-date.
Shares of Schlumberger NV(SLB) fell after the oil services
company reported second-quarter revenue that beat expectations and
revenue that was in line and announced that CEO Paal Kibsgaard will
retire and step down as chairman of the board.
How are other markets trading?
The yield on the 10-year U.S. Treasury was little changed around 2.04%.
In commodities markets, the price of U.S. crude oil initially
jumped as Iran denied that the U.S. Navy downed one of its drones
in the Strait of Hormuz, while gold extended its gains, after
earlier climbing to a six-year peak.
Gold prices are up about 12% this year to a six year high with
some analysts noting a correlation between the rise in the amount
of global bonds with negative yields to $13 trillion from $6
trillion last year and the rise in gold prices
(https://www.ft.com/content/1a7b2212-a6fe-11e9-b6ee-3cdf3174eb89).
Bridgewater Associates fund manager Ray Dalio said this week
(http://www.marketwatch.com/story/head-of-the-worlds-largest-hedge-fund-says-a-paradigm-shift-in-markets-now-makes-gold-a-good-bet-2019-07-17)that
in a negative yield environment it "would be both risk-reducing and
return-enhancing to consider adding gold to one's portfolio."
The U.S. dollar index , meanwhile, was slightly firmer around
97.15.
In Asia overnight Thursday, stocks closed mostly higher, with
the China CSI 300 rising 1.5% , Japan's Nikkei 225 jumping 2%,
while Hong Kong's Hang Seng Index added 1.1%. In Europe, stocks
were slightly higher, with the Stoxx Europe 600 up 0.2%.
(END) Dow Jones Newswires
July 19, 2019 12:22 ET (16:22 GMT)
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