Benchmarks closed mixed on Friday as upbeat tech earnings offset negative reports of energy firms and discouraging GDP data. Alphabet and Amazon posted strong results; however, Exxon and Chevron reported weak results. The S&P 500 eked out gains, barely missing a record closing high, while the Nasdaq was able to post its best finish in more than a year. The Dow closed in the red, but, posted its sixth consecutive month of gains. The S&P 500 and the Nasdaq too ended in positive territory for the month.
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The Dow Jones Industrial Average (DJI) decreased 0.1%, to close at 18,432.24. The S&P 500 rose 0.2% to close at 2,173.60. The tech-laden Nasdaq Composite Index closed at 5,162.13, gaining 0.1%. The fear-gauge CBOE Volatility Index (VIX) decreased 3.3% to settle at 12.30. A total of around 4 billion shares were traded on NYSE on Friday. Advancers outpaced declining stocks on the NYSE. For 61% stocks that advanced, 36% declined.
Alphabet Inc (GOOGL – Analyst Report) notched up second quarter revenues of $21.5 billion, gaining 21% compared to the same period last year. Other Bets, made up of Alphabet’s so-called moonshot projects like Nest, Verily and its super-fast internet service Fiber, posted revenue of $184 million, more than double the $74 million posted during the same period last year. The company also reported net income of $4.88 billion, more than $3.93 billion a year earlier.
As companies bought more of its mobile ads, while users clicks increased, Alphabet was able to post a blockbuster second quarter performance. According to Google Chief Executive Officer Sundar Pichai, robust gains in its red-hot video market also propelled the company’s growth. Shares of the tech-behemoth gained 3.3%.
Meantime, Amazon.com, Inc. (AMZN – Analyst Report) also beat estimates lifted by their move to host other companies’ data on their computer services, also known as cloud. Amazon’s cloud business soared 58% to $2.89 billion in the second quarter compared to same period last year. This helped Amazon post $857 million profit, almost double the company’s previous high. Shares of Amazon advanced 0.8%.
Unlike tech firms, energy companies disappointed investors. Exxon Mobil Corporation’s (XOM – Analyst Report) earnings per share of $0.41 were much lower than the Zacks Consensus Estimate of $0.64. Revenues came in at $57.694 billion, lower than the Zacks Consensus Estimate of $59.834. Shares of Exxon Mobil fell 1.4%.
Chevron Corporation’s (CVX – Analyst Report) revenues also came in at $29.3 billion for the second quarter, lower than the Zacks Consensus Estimate of $29.8 billion. However, its quarterly earnings per share of $0.49 came in ahead of the Zacks Consensus Estimate of $0.31. Shares of Chevron increased 0.7%.
U.S. economy’s growth at a slower than expected pace in the second quarter also dented investors’ sentiment. According to the “advance” estimate by the Bureau of Economic Analysis, the second quarter output of goods and services increased at an annual rate of 1.2%, which was lower than the consensus estimate of 2.6% growth. In the first quarter, real GDP increased 0.8%.
For the week, the S&P 500 and the Dow declined 0.1% and 0.8%, respectively, while the Nasdaq gained 1.2%. McDonald’s Corp’s (MCD – Analyst Report) disappointing same-store sales data and The Coca-Cola Company’s (KO – Analyst Report) revenue miss weighed on the Dow. But, Facebook, Inc (FB – Analyst Report) and Apple Inc’s (AAPL – Analyst Report) encouraging second quarter earnings along with strong gains from Linear Technology Corporation (LLTC – Analyst Report) boosted the Nasdaq.
Meanwhile, heightened crude supply worries resulted in sharp decline in oil prices, which eventually had a negative impact on the broader markets. Separately, the Federal Reserve abstained from raising rates last month, but said that near-term risks to the economic outlook have diminished. The central bank pointed out that the labor market has “strengthened” and that household spending is “growing strongly” as buyers are more willing to spend.
For the month, the S&P 500, the Dow and the Nasdaq gained 3.6%, 2.8% and 6.6%, respectively. Markets rebounded from the steep losses it suffered on Brexit woes, with U.S. stocks climbing to record highs. Corporate results came in better than expected, while reassuring domestic economic data raised confidence in the strength of the economy. From homebuilding to retail sales to job creation, all showed signs of improvement.
Quarterly earnings per share of the big banks, Morgan Stanley (MS – Analyst Report) , Goldman Sachs Group Inc (GS – Analyst Report) and JPMorgan Chase & Co (JPM – Analyst Report) outpaced the Zacks Consensus Estimate. Among other major companies, Microsoft Corporation (MSFT), Johnson & Johnson (JNJ) and Alcoa Inc (AA) also came up with upbeat earnings.
Stocks also surged on stimulus hopes from central banks around the world to counter economic gloom. The Bank of England said that most of its members are expecting a loosening of policy in August. This reassured investors who were expecting further stimulus measures to stem the rot of an already reeling economy.
Equities did climb on speculation that Japan’s Prime Minister Shinzo Abe is contemplating to initiate “helicopter money” in order to stimulate economic growth. However, the Bank of Japan took modest easing actions.
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