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U.S. Stocks Stage Late-Day Recovery Attempt But Still Close Mostly Lower

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Stocks staged a late-day recovery attempt but still ended Friday's trading mostly lower following an early move to the downside. The major averages gave back some ground after ending the previous session in positive territory.

The tech-heavy Nasdaq underperformed its counterparts, ending the session down 40.47 points or 0.5 percent at 7,796.66. The Dow edged down 17.16 points or 0.1 percent to 26,089.61 and the S&P 500 dipped 4.66 points or 0.2 percent to 2,886.98.

Despite the pullback on the day, the major averages all moved higher for the week. The Nasdaq advanced by 0.7 percent, while the Dow and the S&P 500 rose by 0.4 percent and 0.5 percent, respectively.

Tech stocks came under pressure after Broadcom (AVGO) reported better than expected fiscal second quarter earnings but lowered its full-year revenue guidance.

Broadcom President and CEO Hock Tan said the chip maker sees a "broad-based slowdown in the demand environment" due to continued geopolitical uncertainties and the effects of export restrictions on Chinese tech giant Huawei.

The comments from Tan led to renewed concerns about the impact of the U.S.-China trade dispute on the broader tech sector.

Traders were also digesting a Commerce Department report showing a substantial upward revision to retail sales data for April.

The Commerce Department said retail sales climbed by 0.5 percent in May after rising by an upwardly revised 0.3 percent in April.

Economists had expected retail sales to increase by 0.6 percent compared to the 0.2 percent drop originally reported for the previous month.

Closely watched core retail sales, which exclude autos, gasoline, building materials and food services, climbed by 0.5 percent in May. The April reading was upwardly revised from no change to a 0.4 percent gain.

FTN Financial chief economist Chris Low called the April revisions the "real story" of the report, noting the "trajectory of second quarter consumption just transformed from ho-hum to solid."

"Needless to say, this is important," Low said. "The collapse of consumption in Q1 and failure of consumption to recover in April was one of the most compelling reasons justifying an interest rate cut."

"There are still other reasons, of course. Business confidence has tumbled. Business investment has slowed. Manufacturing is in trouble," he added. "But consumers, it seems, are alright, which means the risk of recession is diminished."

The Federal Reserve also released a report showing a bigger than expected increase in industrial production in May, although the University of Michigan said its reading on consumer sentiment dropped in June amid concerns about higher tariffs.

Sector News

Despite the late-day recovery attempt by the broader markets, substantial weakness remained visible among oil service stocks. After spiking by 3.7 percent on Thursday, the Philadelphia Oil Service Index plunged by 3.7 percent.

The pullback by oil service stocks came even though the price of crude oil extended the upward move seen in the previous session, with crude for July delivery rising $0.23 to $52.51 a barrel.

Semiconductor stocks also moved sharply on the day, dragging the Philadelphia Semiconductor Index down by 2.6 percent. Broadcom led the sector lower, tumbling by 5.6 percent.

Steel, tobacco and networking stocks also saw considerable weakness on the day, while gold stocks showed a notable move to the upside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Friday. Japan's Nikkei 225 Index rose by 0.4 percent, while China's Shanghai Composite Index slumped by 1 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the German DAX Index slid by 0.6 percent, the U.K.'s FTSE 100 Index and the French CAC 40 Index dipped by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries showed a lack of direction throughout the session before closing roughly flat. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, inched up by less than a basis point to 2.093 percent.

Looking Ahead

Next week's trading is likely to be driven by reaction to the announcement of the Federal Reserve's monetary policy decision on Wednesday.

Most economists expect the Fed to leave interest rates unchanged, although the central bank is expected to provide indications that it is considering lowering rates in the near future.

The Fed decision is likely to overshadow some ordinarily closely watched housing data, including reports on homebuilder confidence, housing starts, and existing home sales.

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