Stock markets fell worldwide on Friday as results from some big US companies disappointed and tobacco shares dropped, while oil prices had their biggest weekly percentage rise this year.
US stocks have rallied over the past six months to records amid signs of solid economic growth globally. Technology shares have led the charge, with companies soaring 22 per cent this year for the best performance among 11 groups in the S&P 500. The sector trades at an average 19 times projected earnings. But Amazon’s stock fell after the world’s largest online retailer reported late Thursday a jump in retail sales along with a profit slump.
“With Amazon’s earnings falling short of estimates, the US market may readjust its expectations,” Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo, said. “Investors are becoming increasingly wary over the historically low volatility levels, with a host of key economic data coming out in the US.”
The US dollar was broadly lower as a combination of uninspiring US economic data and political uncertainty kept traders biased toward the euro and other world currencies.
US gross domestic product growth picked up to 2.6 per cent in the second quarter, matching expectations of economists polled by Reuters.
In Washington, US Senate Republicans failed early on Friday to overturn the health care law known as Obamacare, in a stinging blow to President Donald Trump.
US stocks were also rattled on Thursday after JPMorgan Chase & Co. derivatives strategist Marko Kolanovic said the market’s volatility drought could presage protracted histrionics. Attention remains on corporate results ahead of a report on US second-quarter growth. Financial markets have fluctuated this week following a Federal Reserve statement indicating concern about inflation. Policymakers are expected to begin reducing the Fed’s $4.5 trillion balance sheet in September even as they avoid rushing to raise interest rates.
Despite Friday’s share reactions, second-quarter results have come in mostly better than expected, and stocks are trading near record highs.
The Dow Jones Industrial Average rose 33.76 points, or 0.15 per cent, to close at 21,830.31, the S&P 500 lost 3.32 points, or 0.13 per cent, to 2,472.1 and the Nasdaq Composite dropped 7.51 points, or 0.12 per cent, to 6,374.68.
MSCI’s 47-country All World share index was down 0.2 per cent, while the European STOXX 600 index was down 1 per cent.
Oil prices rose, extending this week’s strong rally built on news that key Opec members pledged to reduce exports and bigger-than-expected US inventory drawdowns.
Brent crude futures rose $1.03 to settle at $52.52 per barrel, while US crude futures rose 67 cents to settle at $49.71.
For the week, US crude rose nearly 9 per cent, its biggest weekly gain this year. The gains in Brent pushed the difference between the two benchmarks to the widest in two months.
“The bullish inventory report this week has helped confirm the declining trajectory of global inventories,” said Sarp Ozkan, analyst at Drillinginfo.com. That, along with Saudi Arabia reducing exports, has “buoyed the expectations of continued inventory normalisation.”