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Stocks Extend See-Saw Performance With Sharp Pullback - U.S. Commentary


Following the substantial rebound seen in the previous session, stocks extended their recent see-saw performance with a sharp pullback during trading on Friday. The major averages regained some ground after an early sell-off but still ended the day significantly lower.

The Dow slumped 296.24 points or 1.2 percent to 24,688.31, the Nasdaq plummeted 151.12 points or 2.1 percent to 7,167.21 and the S&P 500 tumbled 46.88 points or 1.7 percent to 2,658.69.

The major averages also mover sharply lower for the week. The Dow plunged by 3 percent, while the Nasdaq and the S&P 500 nosedived by 3.8 percent and 3.9 percent, respectively.

The pullback on Wall Street came amid a negative reaction to corporate results from some big-name companies after upbeat results from companies like Microsoft (MSFT) and Twitter (TWTR) contributed to the jump on Thursday.

Shares of Amazon (AMZN) fell sharply after the online retail giant reported third quarter earnings that beat estimates but weaker than expected revenues and provided disappointing fourth quarter guidance.

Google parent Alphabet (GOOGL) also closed notably lower after also reporting better than expected third earnings but revenues that came in below expectations.

Meanwhile, shares of Intel (INTC) showed a strong move to the upside after the semiconductor giant reported third quarter results that exceeded analyst estimates and raised its full-year guidance.

Traders largely shrugged off a report from the Commerce Department showing stronger than expected U.S. economic growth in the third quarter.

The Commerce Department said real gross domestic product advanced by 3.5 percent in the third quarter after surging up by 4.2 percent in the second quarter. Economists had expected GDP growth to slow to 3.3 percent.

The slowdown in the pace of growth in the third quarter came after the jump in the second quarter represented the fastest growth since a 4.9 percent spike in the third quarter of 2014.

On the inflation front, the Commerce Department said its reading on core consumer prices, which exclude food and energy prices, showed price growth slowed to 1.6 percent in the third quarter from 2.1 percent in the second quarter.

"Another decent growth number will be welcome news for President Trump, but for markets, the bigger question is where the economy goes next," said ING economists James Smith and Jonas Goltermann.

Smith and Goltermann added, "We see no reason to expect an imminent correction, although growth may begin to ease in 2019 as higher rates bite and fiscal tailwinds fade."

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

The report said the consumer sentiment index for October was downwardly revised to 98.6 from the preliminary reading of 99.0.

Economists had expected the consumer sentiment index to be unrevised at 99.0, which was still down from 100.1 in September.

Sector News

Most of the major sectors climbed off their worst levels of the day, although substantial weakness remained visible among computer hardware stocks. The NYSE Arca Computer Hardware Index plunged by 5.4 percent to its lowest closing level in well over a year.

Hard drive maker Western Digital (WDC) led the hardware sector lower after reporting weaker than expected fiscal first quarter results.

Retail stocks also ended the day sharply lower on the heels of Amazon's disappointing results, with the Dow Jones Retail Index plummeting by 4 percent. The index ended the session at a more than four-month closing low.

Telecom, commercial real estate, software, and utilities stocks also saw considerable weakness, while gold stocks were among the few groups to buck the downtrend amid an increase by the price of the precious metal.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Friday. Japan's Nikkei 225 Index fell by 0.4 percent, while Hong Kong's Hang Seng Index slumped by 1.1 percent.

The major European markets also showed significant moves to the downside on the day. While the French CAC 40 Index tumbled by 1.3 percent, the U.K.'s FTSE 100 Index and the German DAX Index both dropped by 0.9 percent.

In the bond market, treasuries moved notably higher following the modest pullback in the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, slid 5.9 basis points to 3.077 percent.

Looking Ahead

Economic data may attract attention next week, with the Labor Department scheduled to release its closely watched monthly jobs report next Friday.

Traders are also likely to keep an eye on reports on personal income and spending, consumer confidence, labor productivity and costs, manufacturing activity, and international trade.

On the earnings front, Coca-Cola (KO), General Electric (GE), Pfizer (PFE), Amgen Facebook (FB), General Motors (GM), DowDuPont (DWDP), Apple (AAPL), Starbucks (SBUX), and Exxon Mobil (XOM), are among a slew of companies due to report their quarterly results next week.

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