By Clive McKeef
Microsoft shares rally after earnings beat
U.S. stocks were mostly lower in late trade Friday, giving up
earlier gains following a report that said Fed officials were
gearing for a quarter-point rate cut at the end of the month,
rather than a half-point move, and after Iran said it seized a
British-flagged oil tanker in the Strait of Hormuz.
The S&P 500 index rose back above 3,000 level in early
trade, but all three benchmarks look likely to end lower for the
week.
How are the major benchmarks performing?
The Dow Jones Industrial Average was virtually unchanged, but
off 24 points, or 0.1%, at 27,200, while the S&P 500 index was
off 14 points at 2,980, down The Nasdaq Composite Index fell 49
points, or 0.6%, to 8,158.
What's driving the market?
Stocks lost altitude after The Wall Street Journal (paywall)
reported
(https://www.wsj.com/articles/fed-officials-signal-quarter-point-rate-cut-likely-at-july-meeting-11563559491)
that Fed officials, based on recent public statements and
interviews, signaled they were ready to cut rates by a
quarter-percentage point at their July 30-31 meeting, but weren't
prepared to make a half-point reduction.
Expectations for a half-point lowering had been on the rise but
fell back after the report. Fed-funds futures traders now see a
22.5% chance of a half-point move, down from a more than 40%
probability earlier in the day, according to CME Group data.
Analysts said stocks may have also seen some price swings after
reports that Iran said it seized oil vessels
(http://www.marketwatch.com/story/iran-seizes-british-oil-tanker-2019-07-19)
in the Strait of Hormuz, heightening tensions in the region a day
after President Donald Trump said a U.S. Naval ship shot down an
Iranian drone.
(https://twitter.com/BullandBaird/status/1152288089294987264)
Meanwhile, earnings season continues, with investors finding
cheer earlier in the session following better-than-expected results
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).
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 business
and LinkedIn, sending shares to an all-time high.
The spotlight is likely to remain on the Fed and other major
central banks. Globally other policy makers have also been easing,
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 records being hit only last
week, given the support from easier monetary policy currently.
Investors will also continue to pay heed to the U.S.-China trade
dispute.
"In our view, the intra-cycle slowdown will likely prove
transitory and has been largely driven by tariffs (e.g., inventory
front loading, lower global capex, policy uncertainty) and tighter
financial conditions earlier this year," JP Morgan analyst,
Nikolaos Panigirtzoglou, wrote in a note. "We look for a partial
trade resolution this year given the mutual benefit for both sides
to complete a deal, particularly with the US heading into elections
next year, but we acknowledge this remains the largest source of
risk to our outlook.".
U.S. Trade Representative Robert Lighthizer and Treasury
Secretary Steven Mnuchin spoke with their Chinese counterparts on
Thursday
(https://www.reuters.com/article/us-usa-trade-china/u-s-china-officials-discuss-trade-mnuchin-eyes-possible-in-person-talks-idUSKCN1UD1LU)
(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 is 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.
Which stocks are in focus?
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 ended higher
(http://www.marketwatch.com/story/oil-higher-as-rising-us-iran-tensions-stoke-worries-over-flow-of-crude-2019-07-19)
following Iran's seizure of the U.K. tanker, but suffered a steep
weekly loss.
Gold futures lost steam
(http://www.marketwatch.com/story/gold-extends-rise-as-yellow-metals-monster-rally-persists-2019-07-19)
on Friday, ending lower for the session as the dollar strengthened
but gained for the week after logging their first intraday climb
above $1,450 an ounce in six years.
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 15:55 ET (19:55 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.