Benchmarks closed mostly lower on Friday after fourth quarter GDP fell short of estimates. U.S economy slowed more than expected in the fourth quarter after plunge in shipments of soyabeans adversely affected exports. Annual growth failed to reach 3% for the 11th straight year, indicating the hurdles Trump administration faces to speed up expansion. Orders for long-lasting goods, meantime, dropped 0.4% in December for the second month in a row.
A spate of lackluster corporate earnings also weighed on investors' sentiment, with Starbucks among Friday's notable losers after its same-store sales missed forecasts. Chevron's quarterly profit also fell and was the biggest drag on the S&P 500 and the Dow. The Nasdaq somehow bucked the declining trend to edge up on Friday, while all the major indexes finished a monumental week in the green that pushed the Dow above 20,000 for the first time.
For a look at the issues currently facing the markets, make sure to read today's Ahead of Wall Street article.
The Dow Jones Industrial Average (DJI) declined a meagre 0.04%, to close at 20,093.78, after rising on Jan 26 to close above the 20,000 level for a second straight day. The S&P 500 dropped 0.1% to close at 2,294.69. The tech-laden Nasdaq Composite Index, on the other hand, closed at 5,660.78, gaining 0.1%.
The fear-gauge CBOE Volatility Index (VIX) decreased 0.5% to settle at 10.58. A total of around 3.1 billion shares were traded on the NYSE on Friday. Decliners outpaced advancing stocks on the NYSE. For 55% stocks that declined, 41% advanced.
According to the "advance" estimate by the Bureau of Economic Analysis, the fourth quarter output of goods and services increased at a seasonally adjusted annual rate of 1.9% from the previous three months. It was lower than the consensus estimate of 2.2% growth. A widening in the foreign-trade deficit weighed on growth during the final three months of 2016. In the fourth quarter, exports fell 4.3%, its biggest decline since the first quarter of 2015.
But, key bulwarks of the economy such as consumer spending and business investment picked up, while home construction rebounded after two straight quarters of decline. Consumers, the torchbearers for the U.S. economy, increased spending by a solid 2.5%, while business investment pushed higher, with spending on equipment increasing 3.1%. Another bright spot was the housing sector, with residential investment increasing 10.2%.
Weak Corporate Earnings
Starbucks Corporation's ( SBUX ) first-quarter sales of $5.73 billion missed the Zacks Consensus Estimate of $5.83 billion. Same-store sales (comps) grew 3%, but, were down from the previous quarter's growth of 4% due to cooling global traffic trends. It marked one of the company's worst comps growth since 2009. Shares of the coffee chain giant tanked 4% (read more: Starbucks Q1 Earnings in Line, Stock Hit by View Cut ).
Shares of Chevron Corporation ( CVX ) dropped 2.4% after the company's earnings per share came in at 22 cents, lower than the Zacks Consensus Estimate of 64 cents. Lower refining margins led to the underperformance. Revenues of $31,497 million were also below the Zacks Consensus Estimate of $32,605.8 million (read more: Chevron Slides as Q4 Earnings Miss Estimates Badly ).
For the week, the Dow, the S&P 500 and the Nasdaq gained 1.3%, 1% and 1.9%, respectively. Trump's growth-focused actions led the benchmarks to close in positive territory. His moves to revive two major oil pipeline projects, signing executive orders to improve border security and control immigration raised speculation that he will proceed with tax cuts, financial deregulation and introduce expansionary infrastructure spending. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Made Headlines
Range Resources' Proved Reserves Grow 22% in 2016
Upstream energy firm Range Resources Corporation ( RRC ) recently reported that the new reserve of 12,072 billion cubic feet equivalent (Bcfe) marks an increase of 22% from the 2015 reserve of 9,892 Bcfe ( Read More )
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