Major benchmarks post weekly gains
All major stock indexes closed lower Friday after the Dow failed to defend a late comeback, with tech shares under pressure following lower guidance by chip giant Broadcom Inc.
The tech conglomerate cited the effects of the U.S.-China trade fight, while a round of disappointing Chinese economic data also weighed on sentiment.
How did major indexes fare?
The Dow Jones Industrial Average DJIA, -0.07% fell 17.16 points, or 0.1%, to end at 26,089.61, while the S&P 500 index SPX, -0.16% declined 4.66 points, or 0.2%, to 2,886.98. The tech-laden Nasdaq Composite Index COMP, -0.52% shed 40.47 points, or 0.5%, to close at 7,796.66.
All indexes gained for a second week in a row with the Dow up 0.4%, the S&P 500 up 0.5% and the Nasdaq adding 0.7%.
What drove the market?
Tech shares were the biggest losers after Broadcom AVGO, -5.57% lowered its outlook for the rest of the year Thursday afternoon. The update dents hopes for a rebound in the semiconductor market, with the company citing a combination of the U.S. sanctions on Chinese technology giant Huawei Technologies Co. and customers concerned about trade policy. Broadcom shares fell 5.6%.
Trade tensions continued to rattle executives outside the technology sector, too, with more than 600 companies, including Walmart Inc. WMT, +0.39% and Target Corp. TGT, -0.58% urging President Donald Trump in a letter Thursday afternoon to remove tariffs on Chinese imports.
The market’s weaker tone was also blamed in part on signs of further cooling of business activity in China, with May industrial output and investment figures slowing further. May industrial output growth slowed to a more than 17-year low, the weakest since 2002, and well below expectations. Value-added industrial output rose 5% in May after a 5.4% rise in April. Economists had penciled in a 5.5% rise.
Investors continued to watch developments in the Middle East after a pair of oil tankers were attacked near the Strait of Hormuz on Thursday. The U.S. blamed Iran, while Tehran denied responsibility. The incident escalates tensions in the region, heightening fears of a potential U.S.-Iran military confrontation and disruption to oil supplies. Crude futures CLN19, +0.46% climbed 0.5% Friday.
What data were in focus?
U.S. retail sales rose 0.5% in May, slightly below the 0.7% gain expected by economists polled by MarketWatch. More important was the revision of April sales, which the Commerce Department now says rose 0.3%, versus the previously estimated 0.2% decline.
While strong data are indicative of a robust economy, some investors were likely disappointed as they could lower the chances that the Federal Reserve will cut interest rates this summer.
U.S. industrial production rose 0.4% in May, versus the 0.2% rise expected by economists, per a MarketWatch poll, while utilization edged up 0.2 percentage point to 78.1%.
The University of Michigan’s consumer sentiment index fell to 97.9 from 100 in May. Economists polled by MarketWatch expected at reading of 99.
What were the analysts saying?
“The biggest piece of news for markets is Broadcom cutting its guidance,” Tom Martin, senior portfolio manager at Globalt Investments, told MarketWatch. “It adds to fears about global demand. We know we’re in a slowdown, but where does it find its bottom? There’s a hope that we’d get the bounce in the second half of this year,” but the Broadcom guidance and other global economic indicators may put this thesis in doubt, he said.
“The stronger 0.5% [monthly] gain in underlying retail sales in May, along with upward revisions to previous months’ gains, suggests that real consumption growth accelerated to around 3.5% annualized in the second quarter,” wrote Andrew Hunter senior U.S. economist.
“The retail sales data reinforce our view that officials are likely to wait until the September FOMC meeting before pulling the trigger” on lowering rates, he said.
What companies were in focus?
Chewy Inc. CHWY, +59.05% shares surged 59% to $34.99 as they made their debut on the New York Stock Exchange. The stock was priced at $22 a share, above the initially targeted range of $17 to $19, due to strong demand.
Facebook Inc. FB, +2.18% shares rose 2.2% after The Wall Street Journal reported the social network is set to announce a partnership with more than a dozen companies to create a cryptocurrency called Libra. Partners include Visa Inc. V, +0.18% Mastercard Inc. MA, -0.42% PayPal Holdings Inc. PYPL, +0.39%and Uber Technologies Inc. UBER, -2.44%
How were other markets trading?
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.80% was little changed at 2.087%.
Asian markets closed mostly lower with Hong Kong’s Hang Seng IndexHSI, -0.65% losing 0.7% and China’s Shanghai Composite Index SHCOMP, -0.99%falling 1%. Japan’s Nikkei 225 NIK, +0.40% meanwhile, rose 0.4%. In Europe, stocks fell with the Stoxx Europe 600 SXXP, -0.40% off 0.4%.
Gold futures GCN19, +0.12% settled slightly higher and the U.S. dollarDXY, +0.45% firmed against a basket of its peers.