Wall Street capped an earnings-heavy week solidly in negative territory Friday as U.S. stock indexes notched steep weekly losses after global economic data spooked investors.
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Dow Jones Industrial Average shed 161 points, or 0.91% to 17570. The S&P 500 declined 22 points, or 1.06% to 2079, while the Nasdaq Composite lost 57 points, or 1.12% to 5088.
U.S. equity markets were lower for the fourth-straight session as the major averages closed down more than 2%, and the Dow notching its worst week since January.
Economically-sensitive sectors took the heaviest losses on the day with energy, health care, and materials shares leading the decline. Meanwhile, defensive plays like utilities and telecom climbed as traders sought safe havens.
Amazon (AMZN) helped boost the consumer discretionary sector as investors continued to cheer the e-commerce giant’s surprise profit in the second quarter and a big beat on the top line. The company’s shares surged more than 20% during the session, the biggest gain for the stock in nearly six years.
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It was data in China that set off a chain reaction of global losses Friday. Alastair McCaig, IG market analyst, said in a note, a fifth-consecutive month of contraction for Chinese manufacturing PMI data has helped put renewed pressure on global commodities markets, as well as equity markets across the globe.
“A morning of disappointing PMI data, stretching from China to Europe has given markets a sorry start to the last trading day of the week,” he wrote. “With Greece no longer clouding everyone’s judgment, it looks like the investment community has finally had an opportunity to digest just how uninspiring some of the economic data is.”
Over in the U.S. new home sales steepened an initial decline in equity markets. The Commerce Department reported sales of new, single-family homes dropped 6.8% in June to an annualized rate of 482,000 units, far below the expected increase to 546,000 units.
But, IHS U.S. economists Patrick Newport and Stephanie Karol wrote in a note that though it was disappointing, the report was more “noise” than anything.
“Sales fell in nearly every region of the country, and both the average and median price fell year over year, seeming to suggest that demand softened in June. However, this news should be taken with a grain of salt; none of the sales figures pass the test for statistical significance,” they said.
The corporate earnings calendar was light on Friday after the busiest week so far for second-quarter earnings season with two-thirds of the Dow having released results, and 95% of those having beat Wall Street expectations. AbbVie (ABBV) and American Airlines (AAL) were among a handful of companies to report ahead of the opening bell.
With quarterly reports on the back burner for the day, investors turned focus to a mega deal in the insurance industry. Health insurer Anthem (ANTM) put rumors to bed when it said it will buy rival Cigna for $54.2 billion. The merger will create the nation’s largest health insurer by membership, and is the biggest deal ever in the industry. Both companies’ shares traded lower.
The movement on Wall Street perplexed some as positive earnings from big-name firms and a big deal in the insurance space failed to give markets a boost.
Chris Beauchamp, senior market analyst at IG, said in a note the moves were just plain odd.
“M&A activity, exemplified by the FT and now Anthem/Cigna, continues to be strong; while Amazon’s figures show that the American consumer has plenty of desire to open his wallet,” he noted. “And yet, investors have no enthusiasm to buy into an earnings season that, even by recent standards, had the bar set particularly low in terms of expectations.”
Elsewhere in corporate news, AT&T (T) has reportedly cleared its final regulatory hurdle with the FCC in its proposed $48.5 billion acquisition of DirecTV. The Justice Department on Tuesday gave the merger its nod of approval.
Pressure remained on the commodities market, a day after U.S. crude oil entered bear-market territory. On Friday, it traded 0.40% lower to $48.05 a barrel. Brent, the international benchmark also declined 0.77% to $54.50 a barrel.
Energy stocks took a hit during the session. The S&P 500 energy sector shed 2%, while Chevron was among the biggest laggards on the Dow, giving up about 2.5%. Meanwhile, other oilfield service heavyweights including Halliburton and Baker Hughes were also in negative territory.
Gold continued to come under selling pressure, falling to a 5-1/2 year low, as worries continue to swirl about when the Federal Reserve will begin to hike short-term interest rates, and the impact of a stronger dollar. The precious metal reversed course, rising 0.26% to $1,096 a troy ounce in recent action, and was set for the worst week since October.
Copper, meanwhile, continued to trade near six-year lows.
In currencies, the euro fell 0.07% against the U.S. dollar. The yield on the benchmark 10-year U.S. Treasury note fell 0.012 of a percentage point to 2.266%. Bond yields move in the opposite direction of prices.
Asia markets ended the week solidly lower: China’s Shanghai Composite index shed 1.29%. Hong Kong’s Hang Seng lost 1.06%. Japan’s Nikkei slumped 0.67%.
The Euro Stoxx 50, which tracks large-cap companies in the eurozone fell 0.96%. Meanwhile, the German Dax fell 1.50%, the French CAC 40 was 0.64% lower, while the UK’s FTSE 100 shed 1%.