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Major Averages Close Mixed On The Day But Lower For The Week - U.S. Commentary


After an early move to the downside, stocks turned mixed over the course of the trading session on Friday. While the tech-heavy Nasdaq crept into positive territory, the Dow and the S&P 500 remained stuck in the red.

The major averages ended the day on opposite sides of the unchanged line. While the Nasdaq inched up 0.89 points or less than a tenth of a percent to 6,750.94, the Dow slipped 39.73 points or 0.2 percent to 23,442.21 and the S&P 500 edged down 2.32 points or 0.1 percent to 2,582.30.

Even with the mixed performance on the day, the major averages all moved lower for the week. The Dow fell by 0.5 percent, while the Nasdaq and the S&P 500 both dipped by 0.2 percent.

The weekly declines ended eight-week winning streaks by the Dow and the S&P 500 and a six-week winning streak by the Nasdaq.

The mixed close on the day came as traders continued to digest the details of the Senate Republican version of tax reform legislation.

The Senate bill includes some significant differences from the House version, including a delay in the implementation of a cut in the corporate tax rate.

While the Senate version still reduces the corporate tax rate to 20 percent from 35 percent, the new rate would not take effect until 2019. The House bill would start the 20 percent rate next year.

A number of other differences related to issues such as deductions and the estate tax have raised some questions about the outlook for tax reform.

House Republicans could pass their version as early as next week, although it remains to be seen if GOP lawmakers can overcome the differences in the two bills to get legislation to the president's desk.

On the economic front, a report from the University of Michigan showed a bigger than expected pullback in consumer sentiment in the month of November.

The report said the preliminary reading on the consumer sentiment index for November came in at 97.8 compared to the final October reading of 100.7. Economists had expected the index to dip to 100.0.

The bigger than expected decrease by the consumer sentiment index came after it surged up to a thirteen-year high in October.

Among individual stocks, shares of J.C. Penney (JCP) closed sharply higher after the department store operator reported a narrower than expected third quarter loss on better than expected revenues.

Graphics chip maker Nvidia (NVDA) also showed a strong move to the upside after reporting third quarter results that beat analyst estimates on both the top and bottom lines.

On the other hand, shares of Finish Line (FINL) saw significant weakness after Cowen downgraded its rating on the athletic apparel retailer to Underperform from Market Perform.

Digital ad placement company The Trade Desk (TTD) also posted a steep loss after reporting better than expected third quarter results but providing disappointing revenue guidance.

Sector News

Reflecting the lackluster close by the broader markets, most of the major sectors ended the day showing only modest moves.

Gold stocks saw notable weakness, however, with the NYSE Arca Gold Bugs Index sliding by 1.2 percent. The losses by gold stocks came as the price of gold for December delivery slumped $13.30 to $1,274.20 an ounce.

On the other hand, electronic storage stocks showed a strong move to the upside, driving the NYSE Arca Disk Drive Index up by 1.2 percent. With the gain, the index reached its best closing level in over two years.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index slid by 0.8 percent, while Hong Kong's Hang Seng Index edged down by 0.1 percent. However, China's Shanghai Composite Index bucked the downtrend.

The major European markets also moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 0.7 percent, the French CAC 40 Index and the German DAX Index fell by 0.5 percent and 0.4 percent, respectively.

In the bond market, treasuries moved notably lower after ending the previous session roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, advanced by 6.9 basis points to 2.40 percent.

Looking Ahead

Next week's trading may be impacted by the latest economic data, with reports on producer and consumer prices, retail sales, industrial production, and housing starts likely to attract considerable attention.

On the earnings front, Wal-Mart (WMT), Home Depot (HD), Target (TGT), Cisco (CSCO), Best Buy (BBY), Tyson Foods (TSN), and Gap (GPS) are among the companies due to report their quarterly results next week.

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