U.S. stocks retreat Friday following their biggest rally in a month, after Snap Inc. SNAP, -38.90% delivered disappointing earnings ahead of next week’s deluge of quarterly results from technology giants.
Earnings have been a major focus among investors concerned about a slowing U.S. economy, with the Federal Reserve next week likely to fire off another big interest-rate increase to fight inflation.
How are stocks trading?
- The Dow Jones Industrial Average DJIA, -0.51% shed 263 points, or 0.8%, to 31,769.
- The S&P 500 SPX, -1.02% fell 57 points, or 1.4%, to 3,941.
- The Nasdaq Composite COMP, -1.90% shed 285 points, or 2.4%, to 11,772.
Major indexes remained on track for weekly gains.
What’s driving markets?
Stocks turned lower Friday, after the S&P 500 index briefly broke above 4,000 for the first time since June 9, with shares of technology and communications companies weighing down Wall Street.
“Snap is really weighing hard on technologies, and the like,” said Kent Engelke, chief economic strategist at Capitol Securities, by phone.
While earnings expectations have been adjusting to inflation pressures, tighter financial conditions and growing recession fears, “If you miss expectations, you get crushed,” he said.
The slump has next week’s earnings in focus for some of the biggest tech names on Wall Street report, including Microsoft MSFT, -1.61%, Meta, Apple AAPL, -0.71% and Amazon AMZN, -1.82%, along with Boeing BA, -1.59%, McDonald’s MCD, -0.11% and Caterpillar CAT, -1.44%.
Economic data also remains in the spotlight as more signs of slowing emerge, particularly with the Federal Reserve widely expected to raise its policy rate another 75 basis points next week as it battles high inflation.
The S&P Global Market Intelligence U.S. Purchasing Managers’ Index on Friday showed the biggest contraction in services and manufacturing activity since the start of the pandemic. This comes as more than two-thirds of the S&P 500 companies who have reported earnings have surpassed Wall Street’s expectations.
“The preliminary PMI data for July point to a worrying deterioration in the economy,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. “Excluding pandemic lockdown months, output is falling at a rate not seen since 2009.”
But from a purely technical perspective, stocks were likely due for a pullback on Friday anyway, said Kevin Dempter, a technical analyst at Renaissance Macro.
“You’ve had a 10% rally off the lows for the S&P, and a 15% for the Nasdaq. You’re getting to overbought levels, and you’re hitting some levels of resistance,” Dempter said.
The 10-year Treasury yield TMUBMUSD10Y, 2.775% fell 12 basis points to 2.80% from 2.908% in the previous session as investors weigh the odds of a U.S. recession.
What companies are in focus?
- Verizon Communications Inc. stock VZ, -6.96% tumbled 7.6% after the telecommunications group cut full-year guidance and missed second-quarter earnings and revenue estimates.
- Schlumberger Ltd. SLB, +4.67% shares rose after the oilfield equipment and services group reported better-than-expected results and lifted its outlook.
- Seagate Technology Holdings PLC STX, -8.05% was down 9.4% after the data-storage device group’s results and outlook fell short of Wall Street expectations.
- Mattel Inc. MAT, -6.08% fell 6.6% after the toymaker reported a forecast-beating quarterly profit, but a 20% slump in sales of its American Girl business.
- HCA Healthcare Inc. HCA, +12.08% was the best performer on the S&P 500, rising more than 12% after a strong earnings report.
How are other assets trading?
- Oil futures swung between gains and losses, with U.S. crude CL.1, -1.68% CLU22, -1.68% recently falling 1.8%, to $94.62 a barrel.
- Gold GC00, +0.53% GCQ22, +0.53% rose $14, or 0.8%, to settle at $1,727.40 an ounce.
- Bitcoin BTCUSD, +0.03% turned 1% lower at $22,990.
- The Stoxx Europe 600 index SXXP, +0.31% rose 0.3%, booking a 2.9% weekly gain, and its highest closing value in about six weeks, according to Dow Jones Market Data.
—Barbara Kollmeyer contributed to this article