Wall Street remained mostly unchanged on Friday as gains of chip makers were offset by loss in social media stocks. Investors were by and large reluctant to take risk and waiting for the third quarter earnings results which will flood the market within next couple of weeks. The Dow and Nasdaq managed to closed in positive notes while S&P 500 finished in the red. However, price movements were marginal in either direction. Notably, the S&P 500 posted its best quarterly gain since the fourth quarter of 2013.
The Dow Jones Industrial Average (DJI) closed at 26,458.31, advancing 0.1%. The Nasdaq Composite Index (IXIC) closed at 8,046.35, gaining 0.1%. However, the S&P 500 Index (INX) lost 0.02 points to close at 2,913.98. A total of 7 billion shares were traded on Friday, higher than the last 20-session average of 6.8 billion shares. Advancers outnumbered decliners on the NYSE by 1.25-to-1 ratio. On the Nasdaq, advancers had an edge over decliners by 1.17-to-1 ratio. The CBOE VIX decreased 2.3% to close at 12.12.
How Did the Benchmarks Perform?
The Dow ended in positive territory for the second straight day. Notably, 18 components of the 30-stock blue-chip index finished in the green while twelve ended in the red. The tech-heavy Nasdaq Composite closed in the green for two successive days due to gain by chip makers.
The S&P 500 was down marginally led by a decrease of 1% in Financials Select Sector SPDR (XLF). However, Utilities Select Sector SPDR (XLU) and Real Estate Select Sector SPDR (XLRE) rose 1.5% and 1.2%, respectively. Notably, six out of 11 sectors of the benchmark index finished in negative territory while five ended in the red.
Chip Makers Gains were Offsets by Loss in Social Media
Chipset manufacturers were major gainers on Friday led by chipset giant Intel Corp. INTC. The stock price of the company soared 3.1% following confirmation that it will be able to meet its full-year 2018 revenue target. Positive outlook by Intel has also lifted other stocks in the same industry. Shares of NVIDIA Corp. NVDA and Xcerra Corp. XCRA were up 5.1% and 2%, respectively.
Meanwhile, social media stocks tumbled led by Facebook Inc. FB. The behemoth of this industry reported that it identified a massive security lapse on its platform affecting nearly 50 million accounts. Consequently, shares of Facebook plummeted 2.6%. Its closest rival Twitter Inc. TWTR also plunged 3.3%. Twitter carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
On Sep 28, the Department of Commerce reported that the U.S. consumer spending increased steadily in August at 0.3%, in line with consensus estimate. Notably, consumer spending constitutes nearly 70% of the U.S. GDP.
Personal income rose 0.3% in August, missing the consensus estimate of 0.4%. Personal savings rate was unchanged in August at 6.6%. Average wage rate increased 0.5% in August, the fasted pace since January.
Personal Consumption expenditure (PCE) index grew 0.2% in August. However, the 12-month increase in PCE index fell to 2.2% in August from 2.3% in July. The core PCE index (excluding food and energy) - Fed’s preferred gauge of inflation measure - remained steady at 2%.
The final reading of the University of Michigan's consumer sentiment index was pegged at 100.1 in September. Notably, September reading was the second highest in 2018 after March and third highest since January 2004. However, the figure was slightly below the consensus estimate of 100.5.
Chicago PMI (purchasing manager’s index) fell 60.4 in September from 63.6 in August. The index for September was also below the consensus estimate of 62.2, reflecting its five-month low level.
Weekly Round Up
U.S. stock markets were mostly down in the last week of September. The Dow and S&P 500 were down 1.1% and 0.5%, respectively while Nasdaq Composite was up 0.7%. Markets were rattled in the first three days due to trade were fears and Fed’s interest rate hike for the third time this year. However, a partial recovery took place in the last two days buoyed by a series of strong economic data.
Monthly Round Up
Wall Street was mostly in the uptrend in September despite the fact that this month is traditionally notorious for never providing positive returns. The Dow and S&P 500 gained 1.9% and 0.4%, respectively. However, Nasdaq Composite ended in the red with a loss of 0.8%.
The primary reason which dented investors’ confidence is the lingering trade conflict between United States and China. During this month, President Trump imposed $200 billion of fresh tariffs on China and threatened to impose another set of tariffs worth $267 billion if China retaliates. China reacted with $60 billion of retaliatory tariffs.
On the other hand, two positive developments have lifted market participants risk appetite. First, despite imposing fresh tariffs, the U.S. government kept the rate at 10% instead of 25% talked earlier. Moreover, a series of imported products from China which are frequently use by tech behemoths were eliminated from the tariff list.
Second, a series of strong economic data such as consumer confidence, industrial production, capacity utilization, durable goods order, initial claims, consumer spending and core PCE inflation significantly bolstered sentiments of market participants.
Quarterly Roundup
U.S. stocks flourished in the third quarter of 2018 breaking several records. All three major stock market indexes – the Dow, S&P 500 and Nasdaq Composite – gained significantly by 9%, 7.2% and 7.1%. For S&P 500, the third quarter of 2018 marked the best since the fourth quarter of 2013. For Nasdaq Composite, it was the best one since the first quarter of 2017. The Dow gained more than 2,100 points during this quarter.
Notably, both the Dow and S&P 500 raised eleven in the past 12-quarters while Nasdaq Composite recorded its ninth consecutive quarterly gain. On the other hand, the CBOE VIX – stock markets favorite gauge for volatility – declined more than 19% in the third quarter, its largest since the first quarter of 2016.
Robust performance by U.S. corporates in the second quarter of 2018, impressive fundamentals of the U.S. economy, a strong labor market the government’s deregulation measures have enabled investors to sidetracked trade related concerns, geopolitical conflicts and inflationary expectations.
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