Stocks closed mostly lower, but tech gains pushed Nasdaq higher
Beijing Wall Street ended a volatile week of trading with most stocks down on Friday, although gains from several tech companies pushed the Nasdaq Composite Index to another record high and its first close above 16,000 points.
The S&P 500 lost 0.1% on the day after hitting an all-time high. The Dow Jones Industrial Average fell 0.7% and the Nasdaq Composite rose 0.4%. Despite the week’s ups and downs, the S&P 500 and Nasdaq posted weekly gains, while the Dow posted its second consecutive weekly loss.
About 66% of companies in the S&P 500 fell, with financial and energy stocks accounting for a large share of the decline. These losses have outpaced gains in technology and a mix of businesses that rely on consumer spending.
Investors continued to review earnings from a group of retailers to close out the latest round of corporate report cards. They are also focusing on potential risks to the economy and corporate profits from rising inflation, which has pushed stocks onto a bumpy path after weeks of solid gains.
“There remains a wide range of findings and perspectives on whether inflation is becoming more consistent and permanent or if it will be temporary,” said Bill Northey, senior investment manager at US Bank Wealth Management.
The S&P 500 index fell 6.58 points to 4,697.96 points. The Dow Jones Industrial Average fell 268.97 points to 35,601.98, its third consecutive decline. The Nasdaq added 63.73 points to 16,057.44, its sixth straight gain.
Small cap stocks fell more than the broader market. The Russell 2000 Index lost 20.43 points, or 0.9%, to 2,343.16.
The yield on the 10-year Treasury fell to 1.54% from 1.59% late Thursday. The effect of lower bond yields on banks that depend on higher yields to collect more profitable interest on loans. JPMorgan Chase fell 1.3 percent.
US crude oil prices fell 3.7%, which led to a decrease in energy stocks. Exxon Mobil shares fell 4.6 percent.
TurboTax maker Intuit jumped 10.1% to post the biggest gain in the S&P 500 after it raised its fiscal year earnings forecast. And Adobe, the software maker, rose 2.6%.
The number of companies that depend on direct consumer spending on goods and services has also increased. Tesla gained 3.7 percent and Nike gained 2.1 percent.
Moderna shares jumped 4.9% and Pfizer shares fell 1.2% after the US Food and Drug Administration opened coronavirus booster shots from the two companies to all adults.
US stocks have mostly risen since early October as companies reported much stronger summer earnings than analysts had expected. More than 95% of companies in the S&P 500 have reported their most recent quarterly results in recent weeks, posting gross profit growth of nearly 40%. This beat analysts’ expectations of 23% growth in June.
However, companies face rising raw material costs and supply chain problems that can hinder future profits. Consumers have so far absorbed the higher prices, but analysts fear they may eventually be able to rein in their spending if the high prices persist for too long.
The situation is pressing the Federal Reserve to move faster to rein in ultra-low interest rate policies in order to combat rising prices. Analysts at Bank of America on Friday forecast that the Federal Reserve will likely begin raising its benchmark interest rate in the second quarter of 2022, two quarters earlier than they previously forecast.
Companies are facing rising raw material costs and supply chain problems that have been cutting off from operations. This has raised concerns that a wide range of industries could see growth stunted until 2022.
More recent examples include Williams-Sonoma. The cookware and home furnishings seller warned investors that supply chain problems could hurt its inventory during the middle of next year. The stock was down 1.5%.
Applied Materials fell 5.5% after reporting weak financial results and a disappointing earnings outlook in part due to supply chain problems.
“These (supply chain) issues will likely fade over time, but they may not clear up in time for the holiday season,” Northey said. “This may cause demand to not be met or to shift to early next year.”
Wall Street is also concerned that consumers will eventually cut back on spending due to higher prices. The Labor Department said prices for US consumers jumped 6.2% in October from a year earlier, sending households facing the highest inflation since 1990.
However, higher prices did not hamper consumer spending, and retail sales jumped 1.7% in October, according to the Commerce Department. This was the biggest monthly gain since March.
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