Stocks down slightly; Boeing weighs down the Dow
The stock market rally that led to record highs this week stalled Friday as investors waited to see where corporate profits are headed.
Major U.S. indexes were little changed on Friday afternoon, a day after the Dow Jones industrial average and the Standard & Poor’s 500 index set all-time highs.
Most signs suggested that the rally isn’t over, just paused. Indexes that measure tech stocks and small companies both rose slightly. And the Dow’s small decline was because of Boeing, which dropped after a fire on a 787 Dreamliner parked in London.
Earnings news was mixed. Profits at big banks Wells Fargo and JP Morgan came in better than expected, and that helped financial stocks. But UPS cut its profit outlook and said it’s seeing a slowdown in U.S. industry.
Also, a University of Michigan measure of consumer sentiment came in lower than expected for this month.
Investors will get a lot more information next week, when key reports on inflation and retail sales are due. That’s also when the pace of company earnings reports picks up sharply. Reports are due from the remaining big banks as well as General Electric, Intel, Microsoft and other industry bellwethers.
“This is the jump ball, this is the Lebron James of the market,” said David Darst, chief investment strategist for Morgan Stanley Individual Investor Group, referring to the second-quarter earnings rush. “It’s going to determine where the market goes.”
In afternoon trading, the Dow was down 38 points, or 0.3 percent, at 15,422. The Standard & Poor’s 500 index was up a point at 1,676. Both indexes closed at all-time highs Thursday.
The Nasdaq composite edged up 11 points to 3,590. The Russell 2000, which is made up of smaller companies, rose three points, or 0.4 percent, to 1,037.
All the big indexes are ahead for the week. The S&P 500 had risen for six days in a row before Friday, its longest winning streak since March.
United Parcel Service sank $5.82, or 6.4 percent, to $85.63 after saying its second-quarter and full-year earnings will be less than analysts have been expecting because the company’s customers are using cheaper shipping options. UPS also said it’s seeing a slowdown in U.S. industry.
FedEx fell, too. Its shares were down $2.42, or 2.3 percent, to $101.90.
Cost-cutting boosted profits at Wells Fargo, and its stock rose 67 cents, or 1.6 percent, $42.56. JPMorgan Chase reported a 32 percent jump in profits, but its stock fell 29 cents, or 0.5 percent, to $54.85.
Anthony Conroy, managing director and head trader for ConvergEx Group, said JPMorgan’s credit numbers were strong. “That means the consumer’s out there spending and borrowing and propping up the whole economy, and that’s a good thing,” he said.
Conroy thinks it’s likely that stocks will move higher, as long as second-quarter earnings reports at least match the low expectations that investors have. “The three most important things in the next couple of weeks are earnings, earnings, and earnings,” he said.
Boeing dropped after a fire was reported on a 787 parked at Heathrow Airport, and after another 787 had to divert to a different airport. Boeing struggled earlier this year after its new 787 aircraft was grounded for more than three months because of smoldering batteries, and investors are nervous about any additional problems with the plane.
Before the fire, Boeing had set a new 52-week high of $108.15. The stock dropped $5.06, or 4.7 percent, to $101.80 on high volume. Boeing was the biggest decliner in the Dow. Without the stock’s decline, the Dow would have been about flat.
Other stocks with notable moves included:
— Gap rose 34 cents, or 0.8 percent, to $45.10. Three analysts lifted their price targets after Gap posted revenue at stores open at least a year that was better than the market was expecting.
— WebMD jumped $6.95, or 26 percent, to $33.91 after the medical website operator sharply raised its forecast for its second-quarter results, citing strong demand from advertisers.
— RadioShack Corp. rose 21 cents, or 8.2 percent, to $2.84. Investors were spooked late Thursday after a report that it had hired financial advisers. But they appeared to be reassured after the struggling electronics retailer said it has a strong balance sheet and that the “sole focus” of its discussions with advisers is making its balance sheet stronger.
The yield on the 10-year Treasury note rose slightly to 2.60 percent from 2.57 percent.
The yield has risen a full percentage point since early May, pushing interest rates higher for mortgages and other loans. There’s a fear that higher rates could hurt housing and business borrowing.
John Fox, director of research at Fenimore Asset Management, said housing is improving, employment is improving, and retail and auto sales are good. “Is that all just going to disappear if we have a 3.5 percent Treasury bond? I don’t think it will.”
Crude oil rose $1.04 to close at $105.95 per barrel in the U.S. Other energy prices also rose. Gold slipped $2.30 to $1,277.60.