Tech Stocks Lead Wall Street Higher On Upbeat Earnings News

wallstreet2 061318 31jul20

Stocks saw considerable volatility over the course of the trading session on Friday before eventually ending the day mostly higher. The major averages all moved to the upside late in the session, with the tech-heavy Nasdaq showing a particularly strong upward move.

After falling as much as 300 points, the Dow ended the day up 114.67 points or 0.4 percent at 26,428.32. The Nasdaq surged up 157.46 points or 1.5 percent to 10,745.27 and the S&P 500 climbed 24.90 points or 0.8 percent at 3,271.12.

Despite the advance on the day, the major averages turned in a mixed performance for the week. The Dow dipped by 0.2 percent, while Nasdaq soared by 3.7 percent and the S&P 500 jumped by 1.7 percent.

The higher close on Wall Street partly reflected a positive reaction to better than expected quarterly results from several leading technology companies.

Shares of Apple (AAPL) spiked by 10.5 percent to a new record high after the tech giant reported better than expected fiscal third quarter results and announced a 4-for-1 stock split.

Amazon (AMZN) and Facebook (FB) also posted substantial gains after reporting quarterly results that exceeded analyst estimates on both the top and bottom lines.

On the other hand, Google parent Alphabet (GOOGL) came under pressure despite reporting better than expected second quarter results. The company did report its first-ever quarterly drop in revenue.

The upbeat tech earnings news seemed to overshadow concerns about stalled negotiations over a new coronavirus stimulus package.

With the Republican-controlled Senate adjourning for the weekend on Thursday, a $600 weekly federal unemployment benefit is set to expire at the end of the day.

Democrats rejected a temporary extension of the jobless benefit, with Senate Minority Leader Chuck Schumer claiming a one-week extension "can't be implemented in time."

Lawmakers appear at an impasse as the attempt to reach a compromise between a $1 trillion GOP relief proposal and the $3.4 trillion bill passed by the Democratic-controlled House in May.

On the U.S. economic front, the Commerce Department released report showing personal income slumped by more than expected in the month of June, although the report also showed another substantial increase in personal spending.

The Commerce Department said personal income tumbled by 1.1 percent in June after plunging by a downwardly revised 4.4 percent in May.

Economists had expected personal income to decrease by 0.5 percent compared to the 4.2 percent nosedive originally reported for the previous month.

Meanwhile, the report said personal spending surged up by 5.6 percent in June after skyrocketing by an upwardly revised 8.5 percent in May.

Personal spending had been expected to jump by 5.5 percent compared to the 8.2 percent spike originally reported for the previous month.

A separate report from the University of Michigan showed consumer sentiment deteriorated by more than initially estimated in the month of July.

The report said the consumer sentiment index for July was downwardly revised to 72.5 from the preliminary reading of 73.2. The index is down from 78.1 in June and below economist estimates for a reading of 73.0.

"Consumer sentiment sank further in late July due to the continued resurgence of the coronavirus," said Surveys of Consumers chief economist Richard Curtin.

Sector News

Gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 3.3 percent.

The rally by gold stocks came amid a sharp increase by the price of the precious metal, with gold for December delivery spiking $19.10 to a new record closing high of $1,985.90 an ounce.

Considerable strength also emerged among computer hardware stocks, as reflected by the 2.3 percent jump by the NYSE Arca Computer Hardware Index.

Meanwhile, oil service stocks climbed off their worst levels but still ended the day sharply lower, dragging the Philadelphia Oil Service Index down by 2.1 percent.

The weakness among oil service stocks came despite as increase by the price of crude oil, with crude for September delivery rising $0.35 to $40.27 a barrel.

Steel, biotechnology and airline stocks also ended the day significantly lower, limiting the upside for the broader markets.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Friday, although China's Shanghai Composite Index bucked the downtrend and advanced by 0.7 percent. Japan's Nikkei 225 Index plunged by 2.8 percent, while Hong Kong's Hang Seng Index fell by 0.5 percent.

The major European markets also moved to the downside on the day. While the German DAX Index slid by 0.5 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index tumbled by 1.4 percent and 1.5 percent, respectively.

In the bond market, treasuries showed a lack of direction before finishing the session little changed. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by less than a basis point to 0.536 percent.

Looking Ahead

Developments in Washington are likely to remain in focus next week, although traders are also likely to keep a close eye on the Labor Department's monthly jobs report.

Reports on manufacturing and service sector activity, construction spending, factory orders, the U.S. trade deficit, and weekly jobless claims may also attract some attention.

On the earnings front, Clorox (CLX), Tyson Foods (TSN), Ralph Lauren (RL), Disney (DIS), CVS Health (CVS), Office Depot (ODP), Wendy's (WEN), Bristol Myers (BMY), and Uber (UBER) are among the companies due to report their quarterly results next week.

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