Stocks struggled to defend gains Friday on disappointing earnings from Dow components Exxon Mobil Corp. and Intel Corp., but stronger-than-expected first-quarter U.S. GDP growth helped to offset some of the pressure.
How are the benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.12% rose 10 points to 26,472, while the S&P 500 index SPX, +0.19% added 2 points, or 0.1%, to 2,929, and the Nasdaq Composite Index COMP, +0.05% shed 5 points to 8,112.
For the week, the Dow is on track to post a weekly loss, the S&P 500 is on pace for a gain of nearly 1%, while the Nasdaq has gained more than 1% thus far this week
See: Stock markets are ringing up records and bonds are rallying too
What’s driving the market?
Corporate results continue to roll in with first-quarter results mostly topping lowered market expectations. Still, worries about the next six months remain as investors punish companies that fail to meet estimates, driving shares down on average 3.2%, according to FTSE Russell. That compares with an 2.5% average decline the day after an earnings over the past five years.
Intel INTC, -10.15% shares sank 10%, after the chip maker’s outlook fell way below Wall Street estimates. Fellow Dow component Exxon XOM, -2.97% also disappointed investors after it announced that its first-quarter earnings-per-share fell well short of Wall Street expectations, sending the company’s stock 2.9% lower.
The U.S. economy grew at an annual rate of 3.2% in the first quarter, well above the 2.3% estimated by economists polled by MarketWatch and faster than the 2.2% rate seen in the fourth quarter.
The unusual strength in Friday’s report can be attributed, in part, to a rise in inventories and exports that analysts say aren’t likely to continue in the year ahead, potentially setting the stage for weaker economic growth in the quarters to come.
Opinion: Behind that great GDP number, the real economy is slumping
Nevertheless, such evidence of continued strength in the U.S. economy is in contrast to reports abroad, where economies of the developed world are facing significant headwinds.
The most recent illustration of that is Japanese industrial production, which rose a weaker-than-expected 1% in March versus expectations for a gain of 2.4%. The data come after a spate of lackluster economic forecasts from central bankers from Australia to Sweden.
The University of Michigan said the final reading of its consumer sentiment index in April was 97.2, down a touch from the 98.4 in reading in March.
What are strategists saying?
Zhiwei Ren, portfolio manager at Penn Mutual Asset Management, said that Intel earnings are “having a huge impact on technology shares” after the company cited weakness in its data center business.
“Data centers are a huge source of growth for the tech sector and semiconductor companies,” he said. “The market is loving semiconductor names,” he added, because the growth of cloud computing is driving demand, but Intel’s weakness pokes holes in this thesis, and was affecting sentiment Friday.
Mike Loewengart, vice president of investment strategy at E-Trade Financial Corp., wrote in an email that the GDP data shows the U.S. economy “shot out of the gate big time” in 2019.
“Combine this GDP data with the earnings results we’re seeing and the market trajectory we’ve enjoyed, and things are looking pretty great,” he added. “But we shouldn’t forget where we are in the business cycle. Many sectors are still tempering expectations for the future…while 2019 started off strong, no one knows what the future holds and we should certainly not become complacent.”
Which stocks are in focus?
Uber Technologies UBER, +0.00% is set to sell $500 million in shares to PayPal Inc. PYPL, +0.01% when it sets the price of its coming initial public offering, with the ride-hailing company’s public debut set for some time in May. The company will sell 180 million shares at $44-$50 a share, according to a filing.
Shares of Intuit INTU, -4.68% were off 5% even as the tax-preparation software company said it expects fiscal full-year revenue for its consumer group, which includes products like TurboTax, to rise about 10%, which is the high end of its previous range of 9% to 10% growth.
Shares of Mattel Inc. MAT, +0.33% came off earlier highs to trade up 1.1% after the toy maker reported Thursday evening a significantly narrower loss in the first-quarter compared with last year.
Ford Motor Co. F, +10.59% rallied 10% after the auto maker released its first-quarter earnings late Thursday, announcing earnings and revenue declines on a year-over-year basis that were smaller than Wall Street had expected.
Shares of American Airlines Group Inc. AAL, +0.25% reversed direction to rise 0.1% after the firm lowered its outlook for 2019.
Shares of Amazon.com Inc. AMZN, +2.24% gained 1.8% after the company reported record profits for the first quarter.
How are other markets trading?
Stocks in Asia closed mostly lower after Japan’s Nikkei 225 NIK, -0.22% lost 0.2%, China’s Shanghai Composite Index SHCOMP, -1.20% declined 1.2%, and the CSI 300 Index 000300, -1.33% declined 1.3%. Hong Kong’s Hang Seng Index HSI, +0.19% however, advanced 0.2%. European stocks edged higher as measured by the Stoxx Europe 600 index SXXP, +0.22%
Crude-oil prices CLM9, -3.45% fell more than 3% while gold GCM9, +0.70% settled higher and the value of the U.S. dollar DXY, -0.17% ticked lower, relative to peers.
—Mark DeCambre contributed to this report
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