Major Averages Finish Lackluster Session Roughly Flat - U.S. Commentary

(RTTNews) - Stocks showed a lack of direction over the course of the trading day on Friday following the rally seen in the previous session. The major averages spent the day bouncing back and forth across the unchanged line before closing roughly flat.

The major averages ended the session on opposite sides of the unchanged line. While the Dow edged down 11.15 points or 0.1 percent to 24,311.19, the Nasdaq crept up 1.12 points or less than a tenth of a percent to 7,119.80 and the S&P 500 inched up 2.97 points or 0.1 percent to 2,669.91.

For the week, the S&P 500 closed marginally lower, while the Dow fell by 0.6 percent and the Nasdaq dipped by 0.4 percent.

The choppy trading on Wall Street came as traders digested a mixed batch of earnings news from several big-name companies.

While tech giants Amazon (AMZN), Microsoft (MSFT), and Intel (INTC) reported better than expected quarterly results, energy giant ExxonMobil (XOM) reported first quarter earnings that came in below analyst estimates.

Uncertainty about the outlook for interest rates may also have kept traders on the sidelines following the release of a Commerce Department reporting showing stronger than expected economic growth in the first quarter.

The report showed GDP growth slowed to 2.3 percent in the first quarter from 2.9 percent in the fourth quarter, although the increase still exceeded economist estimates for 2.0 percent growth.

The slowdown in GDP growth came as consumer spending rose by just 1.1 percent in the first quarter compared to the 4.0 percent jump seen in the fourth quarter.

Meanwhile, a reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth surged up to 2.5 percent in the first quarter from 1.9 percent in the fourth quarter.

"With clear signs that inflation is rising pretty rapidly now, the Fed will need to tighten more aggressively this year and that will lay the seeds for an economic slowdown starting next year," said Paul Ashworth, Chief U.S. Economist at Capital Economics.

A separate report from the University of Michigan showed consumer sentiment in the deteriorated by less than initially estimated in the month of April.

The report said the consumer sentiment index for April was upwardly revised to 98.8 from the preliminary reading of 97.8.

The upwardly revised reading exceeded economist estimates of 98.0 but still came in below the final March reading of 101.4.

Sector News

Reflecting the lackluster performance by the broader markets, most of the major sectors ended the day showing only modest moves.

Retail stocks saw considerable strength, however, with the Dow Jones Retail Index climbing by 1.6 percent. With the gain, the index reached its best closing level in over a month.

Online retail giant Amazon led the retail sector higher after reporting first quarter results that exceeded analyst estimates on both the top and bottom lines.

Significant strength was also visible among telecom stocks, as reflected by the 1.3 percent gain posted by the NYSE Arca Telecom Index. The index is bounced off its lowest closing level in over four months.

While real estate and transportation stocks also saw notable strength, steel stocks showed a substantial move to the downside, dragging the NYSE Arca Steel Index down by 2.1 percent. The index pulled back off its best closing level in well over a month.

U.S. Steel (X) led the sector lower after reporting better than expected first quarter earnings but providing disappointing guidance for the current quarter.

Energy stocks also saw considerable weakness on the day as the price of crude oil for June delivery slipped $0.09 to $68.10 a barrel.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Friday. Japan's Nikkei 225 Index climbed by 0.7 percent, while Hong Kong's Hang Seng Index advanced by 0.9 percent.

The major European markets also moved to the upside on the day. While the U.K.'s FTSE 100 Index surged up by 1.1 percent, the German DAX Index and the French CAC 40 Index rose by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries extended the rebound seen in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.3 basis points to 2.957 percent.

Looking Ahead

Next week's trading may be impacted by a number of different factors, including the Federal Reserve's monetary policy announcement next Wednesday.

The Fed is widely expected to leave interest rates unchanged, but traders are likely to pay close attention to the accompanying statement for clues about the outlook for rates.

Earnings news is also likely to remain in focus next week, with a number of big-name companies scheduled to release their quarterly results.

Apple (AAPL), McDonald's (MCD), Merck (MRK), Pfizer (PFE), Yum! Brands (YUM), MetLife (MET), Tesla (TSLA), DowDuPont (DWDP), Kellogg (K), and Sprint (S) are among the companies due to report their results.

Traders are also likely to keep an eye on the latest economic data, including the Labor Department's closely watched economic report due next Friday.

Reaction to reports on personal income and spending, manufacturing and service sector activity, and international trade may also impact next week's trading.

If that were not enough for traders to digest, Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer are due to travel to Beijing next week to hold trade talks with Chinese officials.