U.S. Stocks Pare Back as Fed Signals Small Rate Cut
July 19 2019 - 2:55PM
Dow Jones News
By Corrie Driebusch and Nathan Allen
U.S. stocks retreated Friday afternoon, as the Federal Reserve
appeared to play down chances of a large interest-rate cut.
Stocks lost momentum in afternoon trading as the central bank
clarified its goals for its July meeting. Fed officials signaled
they are ready to cut interest rates by a quarter-percentage-point
at their coming meeting, but are not prepared for bolder action by
making a half-point cut, as analysts and traders have speculated in
recent days, The Wall Street Journal reported Friday.
Earlier in the day, stocks extended their Thursday rise, which
started after New York Fed President John Williams said central
banks must take swift action when faced with adverse economic
conditions, which some investors interpreted as signaling a 0.5%
rate cut in July. However, the bank later said Mr. Williams didn't
intend to signal any specific policy changes.
The S&P 500 and Nasdaq Composite declined less than 0.1% in
recent trading, while the Dow Jones Industrial Average added 42
points, or 0.2%, to 27265. All three indexes remain slightly lower
over the past week, while they are still on track for month gains
of nearly 2% or more following big rises in June.
The yield on the 10-year Treasury note rose to 2.062% on Friday
from 2.040% on Thursday, while the 2-year-note yield, sensitive to
shifting expectations for Fed policy, rose to 1.835%, up from
1.776% on Thursday, according to data from FactSet.
Second-quarter earnings also swung individual companies Friday,
as the first big week of firms reporting results came to a close
with many exceeding beaten-down expectations. Companies that have
missed analyst estimates have been swiftly punished by traders, but
their losses haven't been enough to make a big dent in the broader
market's march higher.
Since the recent stocks rally began in early June, the S&P
500's climb has been consistent with only very small drawdowns,
said Frank Cappelleri, senior equity sales trader and chief market
technician at Instinet. Since July 4, the largest drop in the
S&P 500 has been a 1.7% decline from an intraday trading high
on June 21 to an intraday low on June 26, according to Dow Jones
Market Data.
"It's been quiet and persistent, but this kind of market can
change on a dime," he said.
Among the biggest stocks moving on Friday were Microsoft, whose
shares rose 0.7% after reporting its profits beat expectations and
that its cloud-computing business drove revenue to a record, and
American Express, whose shares fell 2.7% after the credit-card
company reported a rise in total expenses.
With about 15% of companies in the S&P 500 reporting
results, earnings are on track to contract 2.1% in the second
quarter from a year earlier, according to FactSet. At the end of
June, analysts predicted second-quarter earnings would contract 3%
from a year earlier, FactSet data show.
There have been signs of weakness. On Thursday, Netflix's stock
tumbled 10% after the streaming giant said for the first time in
nearly a decade the number of its subscribers declined. That large
drop from one of the biggest contributors to the S&P 500 wasn't
enough to drag down the broader market, and major indexes ended
Thursday higher.
On Friday, the price of oil rose, rebounding from the month's
lows and marking a second day of volatility in the prices. Iran
denied that the U.S. Navy downed one of its drones in the Strait of
Hormuz, following several close encounters between American
warships and the Iranian military on Thursday in the vital oil
shipping route that have further raised tensions between the
nations. U.S.-traded crude oil recently traded up 0.4% to $55.64 a
barrel.
In Europe, the pan-continental Stoxx Europe 600 index rose 0.1%
following a two-day losing streak. The index eked out a small
weekly gain.
In Asia, most benchmark gauges traded higher. Hong Kong's Hang
Seng Index rose 1.1%, buoyed by consumer-goods companies. Japan's
Nikkei 225 index climbed 2%. Both indexes ended the week up 1%.
-- Lauren Almeida contributed to this article
Write to Corrie Driebusch at corrie.driebusch@wsj.com
(END) Dow Jones Newswires
July 19, 2019 14:40 ET (18:40 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.