Dow falls 150 points as PPI comes in hotter than expected
U.S. stocks were down in early trade Friday, following a hotter-than-expected reading on producer prices, and after the Federal Reserve met expectations by holding interest rates steady and appearing to affirm plans to raise rates in December.
The Dow Jones Industrial Average DJIA, -0.51% were down 150 points, or 0.6%, at 26,038, and the S&P 500 index SPX, -0.74% was off 23 points, or 0.8%, at 2,785, while the Nasdaq Composite Index COMP, -1.24% was retreating 108 points, or 1.4%, at 7,422.
For the week, the Dow is poised to register an increase of 3%, the S&P 500 was on pace to return 2.2% over the past five sessions, while the Nasdaq was looking at a 0.9% gain over the same period.
Chairman Jerome Powell’s Fed held benchmark rates at a range between 2% and 2.25% on Thursday afternoon, and said that the central bank “expects further gradual increases in the target range for the federal-funds rate.”
The policy-setting Federal Open Market Committee delivered no surprises to Wall Street investors. However, investors will continue to wrestle with policy makers’ hopes to normalize interest rates after a decade of easy-money policies.
The key factors that have renewed doubts in the minds of investors are an unceasing decline in oil prices, which has raised questions about the health of the global economy, and persistent anxiety on Wall Street regarding the health of the Chinese economy, the world’s second largest.
Recent data indicate that auto sales in China dropped 12% in the 12 months ending October, and Chinese policy makers announced new bank lending rules in an attempt to manage concerns about its equity market and an economic slowdown.
U.S. crude-oil prices settled in bear-market territory on Thursday, defined as a drop of at least 20% from a recent peak, and that decline may invite questions about the health of demand and the vitality of economies around the globe. Along with other key commodities, oil has often been used as a gauge of world-wide vitality.
As earnings season comes to an end, macro issues will dominate investor thinking for the rest of the year, Aaron Clark, portfolio manager at GW&K Investment Management, told MarketWatch. “The knee-jerk reaction to the election results was that we got the all clear,” he said.
“But we’re not out of the woods yet,” as issues like Italy-EU budget negotiations, slowing global growth, and rising U.S.-China trade tensions have not been resolved, and could loom over the market for months to come. “Investors are walking on eggshells, waiting for the next shoe to drop,” Clark said.
Shares of the Walt Disney Co. DIS, +2.97% were in focus after the entertainment behemoth late Thursday reported fourth-quarter earnings that beat expectations. Profit for the latest quarter rose to $2.32 billion, or $1.55 a share, up from $1.75 billion, or $1.13 a share, in the year-earlier quarter. The stock was up 3.7% Friday morning.
Shares of General ElectricGE, -8.19% were sinking 6.7%, after JPMorgan Chase downgraded the outlook for the conglomerate’s stock.
Proctor and Gamble Co. PG, +0.30% stock was in focus Friday, after the firm announced a reorganization, shrinking the number of business units from 10 to six and streamlining its management structure. The stock rose 0.5% at the start of trade Friday.
Yelp Inc. YELP, -28.40% stock tumbled 28% in early trade, after the company missed Wall Street sales targets and lowered fourth-quarter guidance, in a Thursday evening release.
Dropbox Inc.’s shares DBX, +7.19% were up 1.6% early Friday, after the cloud-storage company reported more cash from each user and grew its paying-customer base in the third quarter, according to a Thursday earnings report, as the company continued to narrow its losses and grow sales faster than Wall Street’s expectations.
Activision Blizzard Inc. ATVI, -12.80% shares are taking a hit Friday, down 13.8%, after the company reported third-quarter profits below Wall Street estimates.
Shares of Skyworks Solutions Inc. SWKS, -6.98% were 9.1% lower, after the semiconductor company issued disappointing guidance for fiscal first quarter of 2019.
CenturyLink Inc. CTL, -11.41% stock is off 10.6% after a Thursday-evening earnings report that showed revenue and profits falling faster than expected.
The producer-price index for October rose 0.6%, versus the consensus estimate of 0.2%, according to a MarketWatch poll of economists. Excluding volatile food and energy prices, producer prices increased by 0.5%.
The University of Michigan’s consumer-sentiment index fell slightly to 98.3 in November from 98.6 in October, in line with expectations of economists polled by MarketWatch.
China’s Shanghai Composite Index SHCOMP, -1.39% fell 1.4% on Friday, the small-capitalization Shenzhen Composite Index 399106, -0.43% ended the session off 0.4%. Meanwhile, Japan’s Nikkei NIK, -1.05% declined 1.1%. European stocks were broadly lower Friday, with the Stoxx Europe 600 SXXP, -0.40% off 0.6%.
The 10-year Treasury note yield was at 3.21%, holding its Thursday levels, while gold GCZ8, -1.13% continued to extend a recent slide, down 1% at 1,211.80 an ounce, and those for U.S. benchmark oil CLZ8, -0.49% was down 1.9% at $59.56 a barrel, sinking beneath a key $60 psychological level, while the dollar, measured by the ICE U.S. Dollar Index DXY, +0.13% held steady.
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