Facebook on track for biggest one-day drop since Nov. 2016
U.S. stocks rose on Friday, with major indexes adding to their recent string of records as energy stocks rallied and offset both a sharp decline by Facebook and mixed corporate earnings from major financial institutions.
Need to know:Markets risk a 'brutal' fall as they ignore the Fed's latest warning shot (http://www.marketwatch.com/story/markets-risk-a-brutal-fall-as-they-ignore-the-feds-latest-warning-shot-2018-01-12)
What are stock indexes doing?
The Dow Jones Industrial Average rose 157 points, or 0.6%, to 25,737. The S&P 500 added 9 points to 2,776, a gain of 0.3%. The Nasdaq Composite Index rose 8 points to 7,219, a gain of 0.1%. All three closed at records on Thursday, and hit intraday records in early trading.
Thus far this week, the Dow is up 1.7% while both the S&P and the Nasdaq are up 1.2%. This is poised to be the second straight weekly gain for both the Dow and the S&P, as well as their seventh positive week of the past eight.
The U.S. stock market will be closed on Monday (http://www.marketwatch.com/story/which-markets-are-closed-on-martin-luther-king-day-2018-01-11) for Martin Luther King Day.
The day's gains were broad, but energy stocks were the biggest outperformer by far, gaining 0.9%. Among the most notable risers, Marathon Oil Corp. (MRO) gained 1.9%, Exxon Mobil Corp. (XOM) was up 0.9%, and ConocoPhillips (COP) was up 1.5%. The move comes as oil trades near three-year highs.
What is driving the markets?
The fourth-quarter earnings season unofficially kicked off on Friday, with results from a number of major financial institutions, a sector analysts expect to put in a mixed performance (http://www.marketwatch.com/story/bank-earnings-will-be-moderate-mixed-messy-and-muddied-but-theres-some-good-news-2018-01-10). Earnings growth is expected to be strong this quarter, although the recently passed tax law out of Washington is expected to "muddy" some results (http://www.marketwatch.com/story/the-tax-bill-could-muddy-what-fourth-quarter-results-say-about-fundamentals-goldman-writes-2018-01-08), according to Goldman Sachs.
JPMorgan Chase & Co.(JPM) reported a 37% drop in earnings (http://www.marketwatch.com/story/jpmorgans-profit-slides-37-hurt-by-tax-bill-2018-01-12), although this was largely related to one-time charges associated from the new tax law, which is expected to provide further gains over the longer term. Wells Fargo & Co. (WFC) reported earnings and revenue that came in below consensus (http://www.marketwatch.com/story/wells-fargo-shares-slip-14-premarket-after-profit-and-revenue-miss-2018-01-12) analyst forecasts in the fourth quarter. Shares of J.P. Morgan rose 0.9% while Wells lost 0.5%.
BlackRock Inc. (BLK) reported earnings that came in above expectations (http://www.marketwatch.com/story/blackrock-tops-estimates-as-net-flows-set-record-2018-01-12), helped by the massive inflows into the company's iShares line of exchange-traded funds. Shares jumped 2.5%.
Read:What to expect when Goldman Sachs and Morgan Stanley report earnings (http://www.marketwatch.com/story/what-to-expect-when-goldman-sachs-and-morgan-stanley-report-earnings-2018-01-11)
Plus: Big bank stocks have plenty of juice left--here's why (http://www.marketwatch.com/story/big-bank-stocks-have-plenty-of-juice-left-heres-why-2018-01-12)
Separately, German Chancellor Angela Merkel's conservative CDU party and Martin Schulz's center-left SPD (http://www.marketwatch.com/story/merkels-party-makes-breakthrough-in-german-government-coalition-talks-2018-01-12)reached an agreement on a blueprint for formal coalition negotiations (http://www.marketwatch.com/story/merkels-party-makes-breakthrough-in-german-government-coalition-talks-2018-01-12). This was seen as a sign of political stability in the eurozone's biggest economy, and it supported the euro, which in turn led to a decline in the U.S. dollar. A weaker greenback is seen as providing a tailwind for the profits of multinational companies.
U.S. retail sales rose 0.4% (http://www.marketwatch.com/story/us-retail-sales-rise-04-in-december-cpi-up-01-2018-01-12) in December, the fourth straight monthly gain, although it was slightly below the 0.5% increase that analysts had forecast. The consumer-price index rose 0.1% in December.
What are strategists saying?
"The overarching sentiment around the tax bill is that we'll continue to see a boost to earnings and optimism, but its hard to imagine that we're not getting close to a point where we're priced for perfection," said Jason Browne, chief investment officer of FundX Investment Group. "There's a question of whether we'll have good earnings, and a possibility that the reality won't live up to what had been anticipated."
Stocks have been in an essentially uninterrupted uptrend for years, and the S&P 500 is poised to go a historic length of time (http://www.marketwatch.com/story/heres-another-milestone-the-sp-500-could-surpass-this-month-2018-01-03) without a dip of even 5%. Volatility has also been historically low (http://www.marketwatch.com/story/the-last-time-stocks-were-this-quiet-was-the-year-the-beatles-went-on-ed-sullivan-2017-12-14).
"The move isn't about fundamentals anymore, but the overall euphoria," Brown said. "When we do get negative moves we don't hold them; the environment pushes people to buy dips. Will that last forever? Of course not. You have to hope people are being realistic."
Which stocks are in focus?
Shares of Facebook Inc.(FB) fell 5.1%, in what is on track to be its biggest one-day percentage loss since Nov. 3, 2016. The decline came after Chief Executive Mark Zuckerberg, in a blog post published late Thursday, said the social-media website will prioritize personal posts from family and friends (http://www.marketwatch.com/story/facebook-announces-big-changes-that-will-put-friends-ahead-of-business-2018-01-11) over business and news media posts. He acknowledged the move could come at the expense of the company's bottom line.
The social-media giant is one of the largest stocks in the market, and as such, moves in it have an outsize impact on major indexes, particularly the tech-heavy Nasdaq, which underperformed the Dow and S&P on the day.
GameStop Corp.(GME) sank 8.3% after it reported a big jump in holiday sales, but said it would take impairment charges (http://www.marketwatch.com/story/gamestops-stock-drops-after-revealing-large-charge-related-iphone-x-related-woes-2018-01-12) of $350 million to $400 million related to its technology brands business.
Shares of eBay Inc.(EBAY) rose 0.4% after an upgrade from analysts at SunTrust RH. Separately, Snap Inc.(SNAP) fell 3.2% after it was downgraded to underperform at Raymond James.
Read: ADT is planning a $2 billion IPO: Here are 5 things you need to know (http://www.marketwatch.com/story/5-things-to-know-about-security-firm-adt-ahead-of-its-ipo-2018-01-10)
What are other markets doing?
In Europe, equity gains were checked by a strong euro, with the Stoxx 600 index up 0.1%.
Stocks in Asia closed mostly higher (http://www.marketwatch.com/story/hong-kong-climbs-to-13th-straight-day-of-gains-as-asian-markets-rebound-2018-01-11), but Japan's Nikkei 225 index fell 0.2%.
Gold rose 0.4% (http://www.marketwatch.com/story/gold-prices-push-to-fresh-four-month-highs-as-investors-wait-for-inflation-data-2018-01-12) as the dollar fell. The ICE dollar index tumbled 0.6% to 91.33, with losses concentrated against the euro (http://www.marketwatch.com/story/euro-hits-3-year-high-on-breakthrough-for-german-coalition-talks-dollar-weak-ahead-of-data-2018-01-12), which hit a three-year high against the dollar.
(http://www.marketwatch.com/story/oil-prices-log-3-year-highs-before-trump-issues-iran-sanction-decision-2018-01-11)Oil prices stepped back from three-year highs (http://www.marketwatch.com/story/oil-prices-slip-from-3-year-high-as-traders-wait-for-trump-move-on-iran-2018-01-12) as investors waited for formal word on whether President Donald Trump will extend temporary waivers on U.S. sanctions against Iran, which has implications for that country's oil exports. The West Texas Intermediate February contract was last down 0.6%.
Read:Trump will extend waiver on sanctions relief for Iran, say sources (http://www.marketwatch.com/story/trump-decides-to-extend-waiver-on-sanctions-relief-for-iran-say-sources-2018-01-12)
In cryptocurrencies, the bitcoin spot price rose 2.9% to $13,710. Bitcoin futures on the CME Group Inc. rose 3.5% to $13,850.
(END) Dow Jones Newswires
January 12, 2018 10:03 ET (15:03 GMT)