Strong earnings lifted stocks early in the week and comments from St. Louis Fed President James Bullard boosted bullish sentiment. Bullard expects low rates to persist over the next two to three years. Apple (AAPL) and Amazon (AMZN) dampened trading as the week wore on with subpar earnings. Major indexes closed the week relatively flat, despite a Friday shakeup following the announcement of a new FBI probe into Hillary Clinton’s emails. With less than two weeks before election day, the news quickly led to a spike in the VIX and sharp currency shifts that had moderated prior to Friday’s closing bell. The Dow Jones Industrial Average finished the week down 0.05 percent, the S&P 500 fell 0.31 percent and the Nasdaq slipped 0.50 percent. The SPDR ETF (SPY) finished down only 0.30 percent.
The flash Purchase Managers Index (PMI) for October showed the fastest rate of U.S. manufacturing sector expansion in almost a year at 53.2, well above the forecast 51.5. The U.S. services PMI rose to its highest level in almost a year. New home sales were slightly lower than forecast estimates.
While a slight draw-down in crude inventory levels lifted oil prices on Wednesday, suspicion over supposed OPEC production cuts and hedging by U.S. shale producers once again took West Texas Intermediate Crude below $50 to close on Friday at $48.70 per barrel. Shares of the Energy Select Sector SPDR ETF (XLE) were consequently down on the week.
Weekly unemployment claims fell by 3,000 claims and remain near 40-year lows. Durable goods orders unexpectedly fell 0.1 percent. Estimates called for no change in the figure. Pending home sales rebounded in September. The index is now 2.4 percent higher than it was a year ago, reinforcing a strong housing market outlook. Third quarter GDP grew at 2.9 percent on the back of surprisingly strong exports. The strong number sent the dollar higher and raised the odds of a December rate hike.
General Motors (GM) shares dropped by 5 percent despite better-than-expected earnings due to margin erosion and future sales growth. Apple (AAPL) shares also fell more than 3 percent as the company reported the third straight quarter of year-over-year declines in revenue and increased competition, especially in China.
Caterpillar (CAT) shares fell more than 3 percent after revenues missed expectations and the company lowered its full-year guidance. Merck (MRK) shares were unchanged following earnings and revenues that beat estimates. Boeing (BA) increased its delivery and revenue outlook to beat expectations. Coca Cola (KO) shares rose ahead of earnings, but remained flat on the week with a drop in net revenues, despite beating earnings estimates.
On Thursday, United Parcel Service (UPS) announced earnings that matched analysts’ forecasts on better-than-expected revenues. Alphabet (GOOG) also exceeded all expectations after the bell on Thursday, sending shares higher. Amazon (AMZN) sold off after-hours when earnings fell short of estimates, pulling down the Nasdaq at the end of the week.