Stocks and Securities
The S&P 500 lost 1.7% in a volatile session on Friday, in which it never touched positive territory. Disappointing earnings reports from Amazon (AMZN, -7.8%) and Alphabet (GOOG, -2.2%) rattled a fragile market pestered by peak-earnings concerns.
The benchmark index briefly dipped into correction territory, characterized by a 10% pullback from a prior high, and eventually the 11 S&P 500 sectors all finished lower. The Dow Jones Industrial Average lost 1.2%, the Nasdaq Composite lost 2.1%, and the Russell 2000 lost 1.1%.
A stronger-than-expected advance Q3 GDP reading took a backseat in Friday’s trading action to Amazon lowering its fourth quarter revenue guidance and Alphabet missing third quarter revenue expectations. The encouraging headline GDP figure, though, was tempered by the understanding that real final sales, which exclude the change in private inventories, increased just 1.4%, marking the slowest growth rate since the fourth quarter of 2016.
Amazon and Alphabet weighed heavily on the underperforming consumer discretionary (-3.6%) and communication services (-2.4%) sectors, as their disappointments filtered through to other growth stocks, which have been beaten down sharply this month on valuation concerns.
Facebook (FB, -3.7%), Netflix (NFLX, -4.2%), and Apple (AAPL, -1.6%) also tumbled from notable gains in the previous session, adding pressure to the communication services and information technology (-1.9%) sectors.
In other earnings news, Mohawk Industries (MHK, -23.9%), Western Digital (WDC, -18.2%), and Colgate-Palmolive (CL, -6.6%) contributed to angst over future earnings growth.
Flooring manufacturing company Mohawk cited weakening demand, inflation, and pricing pressures for its lower outlook; Western Digital said customers are being more conservative, resulting in softening demand; and Colgate-Palmolive encountered profit margin pressures from higher raw material and packaging material costs.
Conversely, Dow component Intel (INTC) easily beat consensus revenue and EPS estimates for the third quarter and issued fourth quarter guidance that exceeded analysts’ average estimates. Shares of the chip maker finished 3.1% higher.
U.S. Treasuries prices rose, as the market turmoil drove some safe-haven positioning. The 2-yr yield decreased five basis points to 2.81%, and the 10-yr yield dropped six basis points to 3.08%. The U.S. Dollar Index traded 0.3% lower at 96.37, though not far from its two-month high.
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