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U.S. stocks skidded lower Friday, with the technology-laden Nasdaq set to notch its first back-to-back decline since mid-May as investors turned their attention to a flare-up in Sino-American animosities while Republican Senators leave Washington for the weekend without obvious progress on another fiscal stimulus bill.
The coronavirus epidemic in southern U.S. states also showed little sign of slowing with total cases now above 4 million.
How are benchmarks performing?
The Dow Jones Industrial Average DJIA, -0.42% declined 129 points at 26,529, or 0.5%; the S&P 500 index SPX, -0.62% gave up 25 points, or 0.8%, at 3,212; and the Nasdaq Composite Index COMP, -1.48% traded 206 points lower at 10,256, a fall of 2%.
The The Nasdaq-100 NDX, -1.58%, comprising the largest companies in the Nasdaq, was down 2.1% at 10,353.
On Thursday, the Dow closed 353.51 points lower, 1.3%, at 26,652.33, while the S&P 500 SPX, -0.62% finished off 40.36 points, or 1.2%, at 3,235.66. The technology-heavy Nasdaq lost 244.71 points, or 2.3%, to reach 10,461.42. If the tech index declines on Friday it would snap a 49-day move for the gauge without consecutive losses, dating back to May 13, according to Dow Jones Market Data.
The Nasdaq-100 lost 2.7% to reach 10,580.59, while the Russell 2000 RUT, -1.08%, which tracks small-cap companies, finished the session virtually unchanged at 1,490.20.
For the week, the Dow is set to end the week 0.6% lower, the S&P 500 is headed for a decline of 0.4%, while the Nasdaq is on pace for a 1.9% weekly loss. The Nasdaq-100 is headed for a 2.3% weekly skid, while the Russell 2000 is on pace for a gain of over 1% for the period.
What’s driving the market?
Major stock indexes were poised to end the week with losses with appetite cooling for the giants of the technology world which have carried the burden of the recent multimonth run-up in the broader market.
Valuations for the Nasdaq Composite are 22% above its long-term price trend, but that compares with 280% above trend during the height of the dot-com bubble in 2000, said Keith Lerner, chief market strategist, at SunTrust Advisory Services.
“Absolute valuations are elevated but are less than half of the levels reached back then,” Lerner said. “The rising influence of a small group of stocks is a risk for the overall market, though these same companies are also contributing an increasing amount of cash flow and profits.”
Wall Street has been heartened by quarterly results that have exceeded a low bar in the middle of pandemic, but a run-up in gold prices to a near record and super-low yields in government debt imply that investors fret that the market remains vulnerable to pullbacks after the Nasdaq and the S&P 500 index posted their worst daily drops since June 26 on Thursday.
Asian markets tumbled overnight Friday as Beijing retaliated against the U.S. by closing the country’s consulate in Chengdu, with tensions between the between the world’s two largest economies escalating from trade frictions to visa restrictions earlier.
President Donald Trump, during a coronavirus news briefing on Thursday, also said that a trade pact between China and the U.S. “means less to me now than it did when I made it,” though he said purchases of corn and other products as a part of that pact are at “records.”
Trump’s comments came as Secretary of State Mike Pompeo on Thursday called on governments around the world to join the U.S. in confronting China’s Communist Party leaders. “The kind of engagement we have been pursuing has not brought the kind of change inside of China that President Nixon had hoped to induce,” Pompeo said in a speech.
“Traders are fearful this could be the beginning of a tit-for-tat spat between the two largest economies in the world,” wrote David Madden, market analyst at CMC Markets UK.
Thus far, China-U.S. tensions have been ignored in favor of a focus on the public-health crisis and fiscal stimulus.
Markets softened on Thursday after Senate Republicans, led by Majority Leader Mitch McConnell, abandoned plans to release a proposal for the next coronavirus relief bill due to continued differences with the White House, almost assuring that an agreement on a further round of stimulus to help curb the economic damage from the viral outbreak won’t come before $600 weekly stimulus concludes at the end of the month.
On the economic front, IHS Market flash manufacturing PMI rose to 51.3 in July from 49.8 in the prior month, weaker than estimates for 51.4, while the flash service PMI rose to 49.6 in the month from 47.9 in the prior month, also below expectations at 50.4, according to Econoday.
A report on new homes sales is due at 10 a.m.
On the health front, the global tally for confirmed cases of the coronavirus that causes COVID-19 climbed above 15.5 million on Friday, according to data aggregated by Johns Hopkins University, and the death toll rose to 633,656. The U.S. added more than 69,900 cases on Thursday, according to a New York Times tracker, that shows cases rising in 40 states over the last 14 days, led by Florida and Louisiana.
Which stocks are in focus?
- Intel Corp. shares INTC, -16.67% dove 17% and rival Advanced Micro Devices Inc. shares gained 11% , after Intel reported its next generation of semiconductor technology will be delayed and that it may actually use a third party to manufacture it as a contingency plan.
- Schlumberger Ltd. SLB, +1.50% said Friday it had a net loss of $3.434 billion, or $2.47 a share, in the second quarter, after income of $492 million, or 35 cents a share, in the same period a year ago. Shares edged up 0.3%.
- E-Trade Financial Corp.shares ETFC, -0.04% were 0.2% lower after the online brokerage service reported fiscal second-quarter results that slightly exceeded Wall Street estimates.
- Shares of Honeywell International Inc. HON, -0.92% slipped 0.7% after the diversified industrial company reported second-quarter profit and sales that fell, but beat expectations.
- Shares of Goldman Sachs Group Inc. GS, +0.62% rose 0.4% Friday, after Bloomberg reported that the bank will pay $3.9 billion as part of a deal that would see Malaysia drop all criminal charges for its role in the 1MDB corruption case.
- Shares of American Express Co. AXP, -0.87% slipped 0.1%, after the credit card and travel services company reported a surprise profit for the second quarter, but revenue that fell more than expected, amid a decline in card member spending and a lower average discount rate.
- Electric-vehicle maker Tesla shares TSLA, -6.88% were Friday, down 10% in early trade as tech stocks were hammered.
- Verizon Communications Inc. VZ, +2.30% topped earnings and revenue expectations for its second quarter on Friday, but shares of the wireless company dipped slightly in premarket trading. Shares of the company were up 3%.
How are other markets trading?
In Asia trade Friday overnight, the China’s CSI 300 gauge 000300, -4.38% closed 4.4% lower, the Shanghai Composite Index declined 3.9%, while Hong Kong’s Hang Seng index HSI, -2.20% shed 2.2%.
In Europe, the Stoxx 600 Europe index SXXP, -1.77% was headed 1.3% lower, while the U.K.’s FTSE UKX, -1.32% shed 1%.
Gold futures GCQ20, +0.46% climbed Friday, up 0.5%, at $1,898.70 an ounce, trading well above the highest settlement on record on the New York Mercantile Exchange for the most-active gold futures at $1,891.90 from Aug. 22, 2011, based on records going back to November 1984.
September futures for the U.S. crude benchmark CLU20, -0.24% was flat at $41.08 a barrel despite concerns about rising inventories.
The 10-year Treasury note yield TMUBMUSD10Y, 0.588% hung around the lowest levels since April 21 at 0.59%. Yields move in the opposite direction of prices.
In currency markets, the dollar edged 0.1% lower in listless trade against its six major rivals, as gauged by the ICE U.S. dollar index DXY, -0.15%.
