Benchmarks rebounded from their initial losses on Friday to end in the green helped by gains in Amazon and Ebay, and new deals in the tobacco industry. However, gains were limited as investors waited for the slew of second-quarter results scheduled for release this week. Wells Fargo kicked off financial sector's earnings season with in-line results. For the week, benchmarks ended in the red zone.
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The Dow Jones Industrial Average (DJI) gained 0.2% to close Friday's trading session at 16,943.81. The Standard & Poor 500 (S&P 500) advanced almost 0.2% to finish at 1,967.57. The tech-laden Nasdaq Composite Index closed at 4,415.49; gaining 0.4%. The fear-gauge CBOE Volatility Index (VIX) dropped almost 4.1% to settle at 12.08. Total volume for the day was roughly 4.9 billion shares, lower than this month's average of 5.4 billion. Advancers outpaced declining stocks on the NYSE. For 53% stocks that advanced, 44% declined.
Thomson Reuters projects S&P 500 companies' profits will grow at 6.2% for the second quarter. This was less than the company's earlier forecast of 8.4% at the beginning of April. On the other hand, according to FactSet Research Systems Inc. ( FDS ), earnings for the S&P 500 are expected to rise 4.9% this quarter, outpacing the 2.1% rise reported in the first quarter of 2014.
Banking heavyweight Wells Fargo & Company ( WFC ) kicked off the earnings season for the financial sector on Friday. Driven by prudent expense management, Wells Fargo earned $1.01 per share in second-quarter 2014, increasing from 98 cents earned in the year-ago quarter. However, the reported figure was in line with the Zacks Consensus Estimate. Quarterly revenues came in at $21.1 billion, outpacing the Zacks Consensus Estimate of $20.7 billion. However, revenues declined 1.4% year over year. Shares of the nation's largest mortgage lender declined 0.6%.
This week, heavy-weights such as JPMorgan Chase & Co. ( JPM ), The Goldman Sachs Group, Inc. ( GS ), Intel Corporation ( INTC ) and Google Inc. ( GOOGL ) are expected to post quarterly earnings results.
US-based manufacturer and seller of cigarettes and other tobacco products Reynolds American Inc. ( RAI ) is in talks to buy Lorillard, Inc. ( LO ), in a multi-billion dollar deal. Shares of Reynolds American dropped 0.8%. Shares of Lorillard surged 4.6%, gaining the most among the S&P 500 components.
The Nasdaq ended in positive territory largely due to gains in Internet stocks. Shares of Internet television network provider Netflix, Inc. ( NFLX ), online travel company TripAdvisor Inc. ( TRIP ), Internet radio service provider Pandora Media, Inc. ( P ), online retailer Amazon.com Inc. ( AMZN ) and online trading community eBay Inc. ( EBAY ) increased 0.3%, 1.4%, 0.2%, 5.6% and 2.3%, respectively.
Internet stocks from the Technology sector such as Google, Groupon, Inc. ( GRPN ), LinkedIn Corporation ( LNKD ), Yahoo! Inc. ( YHOO ), FireEye, Inc. ( FEYE ) and Facebook, Inc. ( FB ) gained 1.1%, 1.2%, 0.2%, 1.4%, 1.1% and 2.3%, respectively. The Technology Select Sector SPDR (XLK) advanced 0.5%, the second highest among the S&P 500 sectors.
The Industrial Select Sector SPDR (XLI) advanced 0.6%, the largest gainer among the S&P 500 sectors. The sector drew strength from its top-weighted components. Key stocks from the sector such as General Electric Company ( GE ), United Technologies Corp. ( UTX ), Union Pacific Corporation ( UNP ), 3M Company ( MMM ) and The Boeing Company ( BA ) increased 1.3%, 0.6%, 0.7%, 0.3% and 1.0%, respectively.
Economic data was limited to June's treasury budget. According to the Department of the Treasury, total budget receipts stands at $324.0 billion in June, a surplus of $71.0 billion. The surplus was less than the consensus estimate of a surplus of $76.2 billion.
For the week, benchmarks ended in the red. S&P 500 recorded its biggest weekly decline since April. The S&P 500, the Dow and the Nasdaq dropped 0.9%, 0.7% and 1.6%, respectively. The CBOE Volatility Index is up almost 20% for the week. This is its biggest weekly rise since April.
Benchmarks settled in the red for the week as investors refrained from placing big bets ahead of the second-quarter earnings season. The earnings season kicked off on an upbeat note with Alcoa Inc. ( AA ) reporting better-than-expected second quarter results.
Benchmarks were also dragged down by declines in momentum stocks. The Nasdaq ended in the red zone largely due to declines in bio-tech and Internet stocks.
Additionally, concerns about the European banking system had dragged domestic benchmarks lower on Thursday. Espírito Santo International SA, the largest shareholder in a group of Espirito Santo family companies, delayed payments on some of its short-term debt and was also responsible for accounting irregularities. The company is the parent company of Portugal's largest bank, Banco Espírito Santo SA.
Among the positives, benchmarks moved higher on Wednesday after minutes from the Federal Open Market Committee's (FOMC) June 17-18 meeting indicated that the Fed will end its bond purchase program in October provided the economy stays on track. They also clarified that this was not an indication that rates would be hiked immediately.
Domestic economic reports were limited to encouraging initial claims numbers and a less-than-expected rise in U.S wholesale inventories. However, these reports hardly impacted the markets. On the other hand, disappointing economic data from Asia led investors to cut equity exposure. China's exports increased less than expected and Japan's Core Machinery Orders declined by 19.5% in May.
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