U.S. stocks ended lower Friday at the end of a choppy session as investors monitored corporate earnings results and looked for signs of easier monetary policy from Federal Reserve officials.
The S&P 500 (^GSPC) edged down 0.62%, or 18.5 points, as of market close. The Dow (^DJI) fell 0.25%, or 68.77 points, while the Nasdaq (^IXIC) fell 0.74%, or 60.75 points. Friday capped off the first down week for the three major indices in three weeks.
Oil prices traded higher Friday after reports that Iran’s Revolutionary Guard claimed to have seized a British oil tanker in the Strait of Hormuz, a major passageway for the global oil supply. However, domestic oil prices still posted a more than 6% decline for the week.
Meanwhile, Friday marked the last day before Federal Open Market Committee (FOMC) members enter a quiet period next week before their meeting July 30-31.
St. Louis Fed President James Bullard, the sole dissenter calling for a rate cut at the Fed’s June meeting, said Friday that he favored a 25 basis point cut at the close of the Fed’s July meeting. However, he downplayed the need for any more aggressive easing. Bullard is a voting member of this year’s FOMC.
There was some misunderstanding Thursday as markets took remarks from New York Fed President John Williams, wherein he stated that central bankers need to “act quickly” in the face of slowing economic growth, to imply a rate cut. However, the New York Fed clarified that the comments were not intended to imply specific policy moves at the next FOMC meeting.
Nevertheless, markets have largely taken this week’s Fed commentary to represent a chorus of dovishness, as central bankers underscored lingering uncertainties clouding the global outlook. Fed Vice Chair Richard Clarida, in an interview with Fox Business Thursday, acknowledged that the U.S. economy “is in a good place,” but added, “You don’t need to wait until things get so bad to have a dramatic series of rate cuts.”
As of Friday afternoon, markets priced in just a 22.5% probability of a 50 basis point ease to key interest rates, down from a more than 40% probability earlier in the session before Bullard’s call. The probability of an at least 25 basis point cut to key borrowing costs has held steadily at 100%, even as data on U.S. manufacturing, retail sales and the labor market have strengthened.
But the U.S.-China trade relationship – one of the key uncertainties Fed officials and economists around the world have continued to highlight – still has yet to firm.
Top trade negotiators including U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin spoke with their Chinese counterparts this week in a phone call, according to multiple reports. No further details from the phone meeting were released. However, Mnuchin told CNBC earlier this week that in-person meetings were likely, if discussions with the Chinese delegation went well.
Meanwhile, corporate earnings season continues to chug along, with mixed results from some of the country’s largest corporations.
Microsoft (MSFT) beat bottom-line expectations and saw revenue surge by double digits over last year for a ninth consecutive quarter, pointing to ongoing growth for the more than 40-year-old company. Shares rose to a record high of $140.65 each shortly after market open, with the company’s total market capitalization sailing past the $1 trillion mark.
Microsoft’s closely watched Intelligent Cloud segment, including its Azure public cloud, Windows Server and SQL Server, generated $11.39 billion in revenue, up 19% over last year and topping expectations. Azure’s revenue alone grew 64% in the quarter, and saw a gross margin percentage improvement.
Microsoft posted adjusted earnings of $1.37 per share on revenue of $33.7 billion, topping expectations for $1.22 per share on $32.8 billion, according to Bloomberg data.
Meanwhile, BlackRock (BLK), the biggest asset management firm in the world, disappointed on quarterly profit and revenue, the latter of which the company attributed to lower securities lending revenue and lower performance fees during the quarter. However, fixed income products resulted in net flows of $110.4 billion in the quarter, an increase of threefold over last year, as investors turned from risk assets to safe havens amid macroeconomic uncertainties.
Consumer sentiment holds steady in July
Consumer sentiment was mostly unchanged between June and July, based on preliminary results from the University of Michigan’s Survey of Consumers released Friday.
The headline index of consumer sentiment ticked up to 98.4 in July, from June’s 98.2 level. However, this was slightly below consensus expectations for a reading of 98.8, according to Bloomberg-compiled estimates. The University of Michigan’s measure of consumer sentiment has held up near last year’s peak of 101.4, representing the highest since 2004.
The subindex tracking consumers’ assessment of current conditions edged lower to 111.1, from 111.9 the month prior. But a subindex gauging consumers’ expectations for future conditions rose more-than-expected to 90.1, above the 89.3 registered in June.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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