Wall Street fades amid geopolitical angst, lower rate-cut hopes
19-Jul-19 16:15 ET
Dow -68.77 at 27154.20, Nasdaq -60.75 at 8146.49, S&P -18.50 at 2976.61
briefing.com
[BRIEFING.COM] The S&P 500 faded into the close and lost 0.6% on Friday, as geopolitical angst and expectations for a smaller Fed rate cut weighed on the broader market. The Nasdaq Composite lost 0.7%, and the Russell 2000 lost 0.5%.
The Dow Jones Industrial Average (-0.3%) fared slightly better, supported by shares of Boeing (BA 377.36, +16.25, +4.5%) after it announced a $4.9 billion charge for its 737 MAX grounding.
Price action for most of the day had been muted until Iran said it seized a British oil tanker and The Wall Street Journal reported that the Fed is signaling a 25-basis points rate cut at the July 30-31 FOMC meeting.
The latter report dampened hopes for a 50-basis points rate cut, which had already been on the decline after a Fed spokesman dialed down comments from NY Fed President Williams that were perceived as dovish yesterday. In turn, the fed-funds sensitive 2-yr yield increased four basis points to 1.82%, while the 10-yr yield increased one basis point to 2.05%. The U.S. Dollar Index rose 0.4% to 97.15.
According to the CME FedWatch Tool, the implied likelihood for the quarter-point cut climbed to 77.5% from 39.8% yesterday.
Heightened tensions in the Middle East did spur a rebound in oil prices ($55.66/bbl, +$0.47, +0.9%), which contributed to the outperformance of the S&P 500 energy sector (+0.5%). Still, losses in eight of the 11 S&P 500 sectors, including the real estate (-1.7%), utilities (-1.5%), and communication services (-1.3%) sectors, dragged on the broader market.
Transport stocks outperformed on Friday after KC Southern (KSU 123.43, +5.44, +4.6%) reported better-than-expected earnings results. The Dow Jones Transportation Average advanced 0.6% to cut its weekly loss to just 0.3%.
In other earnings news, Dow components Microsoft (MSFT 136.62, +0.20, +0.2%) and American Express (AXP 124.82, -3.58, -2.8%) beat earnings estimates, but the price action in shares was disappointing. MSFT was up as much as 3.1% today but faded alongside the broader market during the afternoon.
Friday's lone economic report was the preliminary July reading for the University of Michigan Index of Consumer Sentiment:
- The preliminary University of Michigan Consumer Sentiment Index for July checked in at 98.4 (Briefing.com consensus 98.9) versus the final reading of 98.2 for June.
- The key takeaway from the report is the finding that consumers' expectations fall as their inflation expectations rise, so it will be assumed for the time being that consumer expectations will remain elevated since their one-year inflation expectations dipped from 2.7% to 2.6%.
Investors will not receive any notable economic data on Monday.
- Nasdaq Composite +22.8% YTD
- S&P 500 +18.7% YTD
- Dow Jones Industrial Average +16.4% YTD
- Russell 2000 +14.8% YTD
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