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Stocks Little Changed Amid Data And Geopolitical Developments

Published 09/24/2017, 12:52 AM
Updated 07/09/2023, 06:31 AM

U.S. stocks finished nearly unchanged to round up the trading week as the markets grappled with flared up tensions in regard to North Korea and as international and domestic business activity reports painted a positive global growth picture. Treasury yields and the U.S. dollar pared a weekly advance, while gold was higher and crude oil prices were mixed. In equity news, Texas Instruments (NASDAQ:TXN) raised its dividend and CarMax Inc (NYSE:KMX) rallied after topping quarterly expectations.

The Dow Jones Industrial Average (DJIA) decreased 10 points (0.1%) to 22,350, the S&P 500 Index added 2 points (0.1%) to 2,502, and the Nasdaq Composite ticked 4 points higher (0.1%) to 6,427. In light to moderate volume, 719 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil added $0.11 to $50.66 per barrel and wholesale gasoline was $0.02 higher at $1.63 per gallon. Elsewhere, the Bloomberg gold spot price increased $5.80 to $1,297.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.1% lower at 92.18. Markets were mixed for the week, as the SPDR Dow Jones Industrial Average (NYSE:DIA) gained 0.4%, the S&P 500 Index ticked 0.1% higher and the NASDAQ Composite declined 0.3%.

Dow member McDonald's Corp. (NYSE:MCD $159) announced a 7.0% increase to its quarterly dividend to $1.01 per share, while Texas Instruments Incorporated (NASDAQ:TXN). ( TXN $88) reported that it will boost its quarterly dividend by 24.0% to $0.62 per share and a $6.0 billion addition to its share repurchase program. MCD dipped, while TXN gained solid ground.

CarMax Inc. (NYSE:KMX $73) reported fiscal Q2 earnings-per-share (EPS) of $0.98, versus the $0.95 FactSet estimate, as revenues rose 9.7% year-over-year (y/y) to $4.4 billion, above the expected $4.3 billion. Q2 same-store sales of used autos grew 5.3% y/y, compared to the 5.0% increase that was expected. Shares are rallied.

Preliminary September business activity reports mixed but continue to signal growth

The preliminary Markit U.S. Manufacturing PMI Index showed expansion in output accelerated after rising to 53.0 in September, from August's 52.8 level, matching the Bloomberg expectation. The preliminary Markit U.S. Services PMI Index showed growth for the key U.S. sector this month slowed more than expected, declining to 55.1 from August's 56.0 level, versus forecasts calling for a dip to 55.7.

Readings above 50 for both reports denote expansion in activity and the data followed Markit's eurozone manufacturing and services growth that topped forecasts.

Treasuries were mostly higher, with the yield on the2-Year note flat at 1.44%, while the yield on the 10-Year note declined 2 basis points (bps) to 2.26% and the 30-Year bond rate dipped 1 bp to 2.80%.

Europe mostly higher and Asia mostly lower amid geopolitical uneasiness
Most European equity markets finished higher, with some upbeat economic data in the region helping overshadow flared up risk aversion on new threats by North Korea. Markit's preliminary Eurozone Composite PMI Index—a gauge of activity in both the manufacturing and services sectors—improved to 56.7 in September from 55.7 in August, and versus the projected dip to 55.6. A reading above 50 denotes expansion and German manufacturing activity was a standout in the report as its index unexpectedly rose to a level above 60. The euro ticked higher versus the U.S. dollar following the data and as the greenback was hampered by the geopolitical uneasiness. The markets mostly shrugged off some political uncertainty ahead of this weekend's national election in Germany and as today's highly anticipated Brexit speech from U.K. Prime Minister Theresa May appeared to disappoint as it lacked details on the path to leave the European Union. The British pound saw pressure following May's speech.

Global monetary policy remained in focus as the Fed this week signaled a December rate hike remains in play, while the European Central Bank and Bank of England have offered hawkish signals as of late.

Stocks in Asia finished mostly to the downside amid a reversal as new bomb testing threats by North Korea caused geopolitical tensions to flare up and bolster risk aversion. The yen rallied in the final hours of trading and Japanese equities declined. Shares trading in mainland China and Hong Kong fell, with the geopolitical uneasiness being met with a downgrade of China's credit rating by Standard & Poor's. South Korean stocks decreased and Indian equities dropped. However, strength in financials helped lift Australian securities higher.

Stocks mixed as a plethora issues persist

Stocks finished the week mixed but still remained near record high territory as the markets took a plethora of traditional market-moving events relatively in stride. The U.S. dollar spiked briefly and Treasury yields continued a recent rally on the heels of the Fed's perceived hawkish monetary policy statement. However, both pared gains in the second-half of the week as geopolitical concerns were revived after President Trump's stern warning at this week's UN gathering appeared to prompt a threat of another hydrogen bomb test by North Korea. Natural disasters remained in focus as U.S. homebuilder sentiment, housing construction activity, and existing home sales were impacted by Hurricanes Harvey and Irma, Maria hit the already ravaged Caribbean, and Mexico was rocked by a deadly earthquake.

Telecommunications stocks led to the upside, bolstered by merger chatter regarding T-Mobile US Inc (NASDAQ:TMUS). (TMUS $64) and Sprint Corp (NYSE:S). (S $9), which appeared to ease heated up price competition concerns. Financials posted a solid gain on the rise in bond yields, and energy issues gained ground as crude oil prices posted a third-straight weekly gain. However, the rise in interest rates weighed on real estate and utilities issues, while technology issues declined on the choppiness in the U.S. dollar and pressure on Dow member Apple Inc (NASDAQ:AAPL). (AAPL $152) amid concerns following last week's new iPhone launch. Best Buy Co (NYSE:BBY). Inc's (BBY $54) disappointing long-term outlook and Bed Bath & Beyond Inc (NASDAQ:BBBY)'s (BBBY $23) decisive earnings miss and lowered guidance hamstrung the consumer discretionary sector. General Mills Inc (NYSE:GIS)'s (GIS $51) results preserved concerns toward the packaged foods market to hamper the consumer staples sector.

Next week, the U.S. economic calendar will bring some key data points for the markets to digest, courtesy of Consumer Confidence, preliminary durable goods orders, personal income and spending, as well as the final look at Q2 GDP. A host of Fedspeak is poised to garner attention, headlined by Fed Chairwoman Janet Yellen's speech on inflation, uncertainty and monetary policy, which will include a Q&A segment.

International reports due out next week that deserve a mention include: ChinaCaixin China PMI Manufacturing Index and industrial profits. JapanPMI Manufacturing Index, household spending, retail sales, industrial production and consumer price inflation. Eurozoneconsumer price inflation estimate, along with German business confidence and retail sales. U.K.—Q2 GDP.

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