The main Wall Street indexes dropped on Friday, marking their worst weekly performance since the end of May. The investors were considering the earnings reports and the statements by senior Federal Reserve officials
The broader S&P 500 ended the session down by 0.6% to a level of 2,976.61 points, while the technology index Nasdaq Composite fell by 0.7% to 8,146.49 points. The blue-chip index Dow Jones Industrial Average wiped out 68.77 points and ended the week at 27,154.20 points after rising by more than one hundred points earlier during the trading session. The indexes failed to keep up with earlier increases after Iran announced it had detained a British-flagged oil tanker in the Strait of Hormuz.
The CBOE Volatility Index, which measures the implied volatility of S&P 500 options, was up 6.80% to 14.45.
For the week, the S&P 500 and Nasdaq Composite registered a decline of over 1%, which is their biggest weekly loss since the end of May. Dow Jones wiped out 0.6% of its value during the week. The main Wall Street indexes reached historic highs earlier in the week, but at the end retreated.
The week was difficult. The market has lost momentum after Microsoft published its earnings report, and New York Federal Reserve Governor John Williams spoke on Thursday.
The indices wiped out the small gains of the previous session after New York Federal Reserve Governor John Williams said that the central bank had to “act quickly” when the economic growth slowed and inflation was low. He added that it was “better to preventive measures are taken rather than waiting for a catastrophe”.
The statement of John Williams increased traders’ expectations that the Fed would cut interest rates by 50 basis points at the end of the month.
But a Federal Reserve spokesman in New York hastened to cool the speculation after Williams’ comments, saying that he had referred to an academic study and did not hint at potential policy actions at the forthcoming meeting of the central bank.
In the bond markets, yields on 10-year and 30-year US government bonds rose to 2.057% and 2.581%, respectively.
Corporate stocks performance
The stocks of Microsoft rose by 0.15% to an all-time high after the technology giant surpassed analysts’ earnings and revenue expectations for the quarter.
Boeing stock was in focus after the aeronautics and defence contractor said it would write-off 4.9 billion USD in the second quarter due to the 737 Max groundings.
Kansas City Southern shares rose 4.0% after the railroad operator posted a better-than-expected quarterly profit. Its shares helped the Dow Jones Transport index gain 0.8%.
BlackRock reported second-quarter earnings 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 fell by 2.8% after the payment-processing company reported second-quarter earnings and revenue that slightly surpassed expectations. The stocks of the company has rallied 33.2% year-to-date.
Shares of Schlumberger fell by 0.18% 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.
The top performers on the S&P 500 were State Street Corp (+6.72%), Citizens Financial Group (+6.34%) and Kansas City Southern (+4.64%), while on the flipside were Alliance Data Systems (-4.06%), Pacific Gas & Electric Co (-3.60%) and Gilead Sciences (-3.23%).
Corporate earnings reports
Microsoft reported earnings of 1.37 USD per share in Q2 2019, beating the analysts’ expectations. The company’s revenue rose by 12% YoY to 33.72 billion USD. It’s the ninth straight quarter of double-digit annualized revenue growth. Microsoft’s Intelligent Cloud business segment, which includes the Azure public cloud, Windows Server, SQL Server, Visual Studio, GitHub and consulting services, produced 11.39 billion USD in revenue in the quarter. Analysts polled by FactSet had been expecting 11.02 billion USD in Intelligent Cloud revenue. Revenue from Azure increased 64% year over year, the lowest growth rate in at least four years. Microsoft doesn’t disclose exact revenue figures for Azure. The company did say it saw a more large and long-term Azure contracts in the quarter, in line with the past few quarters.
American Express came out with quarterly earnings of 2.07 USD per share, beating the analysts’ estimates slightly. This compares to earnings of 1.84 USD per share a year ago. These figures are adjusted for non-recurring items. Over the last four quarters, the company has surpassed consensus EPS estimates three times. American Express posted revenues of 10.84 billion USD for the quarter ended June 2019, surpassing the Zacks Consensus Estimate by 0.14%. This compares to year-ago revenues of 10 billion USD. The company has topped consensus revenue estimates two times over the last four quarters.