Focus On Earnings News Leads To Mixed Close On Wall Street - U.S. Commentary

(RTTNews) - Trading on Wall Street was largely driven by reaction to the latest batch of earnings news on Friday, leading to a lackluster performance by the broader markets. While the Dow and the S&P 500 showed only modest moves on the day, the tech-heavy Nasdaq saw a significant drop.

The major averages eventually ended the session mixed. The Nasdaq tumbled 39.66 points or 0.8 percent to 4,906.23, while the Dow edged up 21.23 points or 0.1 percent to 18,003.75 and the S&P 500 inched up 0.10 point or less than a tenth of a percent to 2,091.58.

The mixed performance on the day led to a mixed performance for the week. The Nasdaq fell by 0.6 percent, but the Dow and the S&P 500 rose by 0.6 percent and 0.5 percent, respectively.

The notable decline by the Nasdaq came on the heels of disappointing earnings news from tech giants Microsoft (MSFT) and Alphabet (GOOGL).

Shares of Microsoft slumped by 7.2 percent after the software giant reported adjusted third quarter earnings and revenues that came in below analyst estimates.

Google parent Alphabet also came under pressure on the day after reporting weaker than expected first quarter results.

Outside of the tech sector, industrial firms such as General Electric (GE), Honeywell (HON), and Caterpillar (CAT) closed modestly lower after reporting their quarterly results.

Negative sentiment may also have been generated by a report from Markit showing that its reading on U.S. manufacturing activity unexpectedly fell to a six-year low in April.

Markit said the flash estimate of its manufacturing purchasing managers index came in at 50.8 in April compared to 51.5 in March.

A reading above 50 continues to indicate growth in the manufacturing sector, but economists had expected the index to rise to 52.0.

However, the selling pressure was partly offset by an increase by the price of crude oil. Crude for June delivery climbed $0.55 to $43.73 a barrel, a five-month closing high.

Sector News

With Microsoft leading the way lower, software stocks saw considerable weakness on the day. The Dow Jones Software Index plunged by 3.7 percent to its lowest closing level in almost a month.

Along with Microsoft, Nuance Communications (NUAN), Adobe Systems (ADBE) and Check Point Software (CHKP) also posted notable losses on the day.

Gold stocks also show a substantial move to the downside, dragging the NYSE Arca Gold Bugs Index down by 2.5 percent. The weakness in the sector came as gold for June delivery tumbled $20.30 to $1,230 an ounce.

Significant weakness was also visible among airline stocks, as reflected by the 2 percent drop by the NYSE Arca Airline Index. The index pulled back further off the nine-month closing high it set on Tuesday.

Hawaiian Airlines parent Hawaiian Holdings (HA) posted a steep loss after reporting better than expected first quarter earnings but on weaker than expected revenues.

On the other hand, railroad stocks moved sharply higher, driving the Dow Jones Railroads Index up by 3.9 percent. The index extended a recent rally to reach a five-month closing high.

Norfolk Southern (NSC) helped lead the railroad sector higher, jumping by 10.5 percent after reporting first quarter earnings that exceeded estimates.

Energy stocks also saw considerable strength on the day, benefiting from the increase by the price of crude oil. Brokerage, networking, and tobacco stocks also moved 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 jumped by 1.2 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index slumped by 1.1 percent, the German DAX Index fell by 0.6 percent and the French CAC 40 Index dipped by 0.3 percent.

In the bond market, treasuries showed a lack of direction as the day progressed before closing moderately lower. Subsequently, the yield on the benchmark ten-year note, which moves opposite of it price, rose by 1.8 basis points to 1.888 percent.

Looking Ahead

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

The Fed is widely expected to leave interest rates unchanged, but traders are likely to keep a close eye on the accompanying statement for clues about the outlook for the next meeting in June.

Earnings news is also likely to continue to attract attention, as a slew of big name companies are due to release their quarterly results next week.

On the economic front, traders will be presented with reports on new home sales, durable goods orders, consumer confidence, and personal income and spending.