Exxon profits fall 50% from year-ago period
Stocks whipsawed between small gains and losses Friday morning, after a report on first-quarter U.S. GDP growth came in well above expectations, but as Dow components Exxon Mobil Corp. and Intel Corp. weighed on the blue-chip index, following disappointing earnings.
How are benchmarks faring?
The Dow Jones Industrial Average DJIA, +0.09% were virtually unchanged at 26,404, while the S&P 500 index SPX, +0.14% rose less than a point to 2,927. The Nasdaq Composite Index COMP, -0.13% meanwhile, fell 25 points, or 0.3%, to 8,094.
For the week, the Dow is on track to post a weekly loss of 0.4%, the S&P 500 is on pace for a gain of 0.8%, while the Nasdaq has gained 1.2% thus far this week
What’s driving the market?
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 of 2018.
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.
Nevertheless, such evidence of continued strength in the U.S. economy are 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, with expectations for a gain of 2.4%.
The data come after a spate of lackluster economic forecasts from central bankers from Australia to Sweden.
Meanwhile, corporate results continue to roll in.
Market participants point out that although first-quarter results have thus far topped lowered market expectations, worries about the next six months of 2019 continue, with investors punishing companies that fail to meet Wall Street estimates, driving shares down on average 3.2%, compared with the 2.5% average decline the day after an earnings miss since 2014, according to FTSE Russell.
For example, Intel shares INTC, -9.96% fell 9.4%, after the chip maker’s outlook fell way below Wall Street estimates. Fellow Dow component ExxonXOM, -2.70% also disappointed investors Friday morning, after it announced that its first-quarter earnings-per-share fell well short of Wall Street expectations, sending the company’s stock 2.6% lower.
What are strategists saying?
Zhiwei Ren, portfolio manager at Penn Mutual Asset Management told MarketWatch 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 is 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, -0.31% when it sets the price of its coming initial public offering, with the ride-hailing company’s public debut set for sometime in May. The company will sell 180 million shares at $44-$50 a share, according to a filing.
Shares of Intuit INTU, -6.56% were off 7.7% after the tax-preparation software company said it now expects fiscal full-year revenue for its consumer group, which includes products like TurboTax, to grow about 10%, which is the high end of its previous range of 9% to 10% growth.
Shares of Mattel, Inc. MAT, +7.33% rallied more than 7.8% Friday, after the toy maker reported Thursday evening a significantly narrower loss in the first-quarter compared with last year.
Ford Motor Co. F, +10.69% also released its first-quarter earnings on Thursday evening, announcing earnings and revenue declines on a year-over-year basis that were smaller than Wall Street had expected. The stock rose 10.6% Friday morning.
Shares of American Airlines Group Inc. AAL, -0.66% fell 2.7% Friday, after the firm lowered its outlook for the full year 2019.
Shares of Amazon.com Inc. AMZN, +0.83% were in focus Friday, after the company reported Thursday evening record profits for the first quarter. The stock rose 0.4% early Friday.
What’s on the economic calendar?
The University of Michigan said the final reading of its consumer sentiment indexin April was 97.2, down a touch from the 98.4 in reading in March.
How are other markets trading?
Stocks in Asia closed mostly lower on Friday, after Japan’s Nikkei 225 NIK, -0.22%lost 0.2%, China’s Shanghai Composite Index SHCOMP, -1.20% declined 1.2%, Hong Kong’s Hang Seng Index HSI, +0.19% advanced 0.2% and the CSI 300 Index000300, -1.33% declined 1.3%. European stocks, meanwhile, ticked higher, as measured by the Stoxx Europe 600 index SXXP, +0.14%
Crude-oil prices CLM9, -4.03% were in retreat Friday, falling 3% to $63.22 per barrel. The price of gold GCM9, +0.77% rose 0.7%, while the value of the U.S. dollar DXY, -0.22% ticked lower, relative to peers.