Week In Review: Tech Earnings Provide Late Boost
Stocks began the week on a lower note as investors cashed in on last week's record highs, but reclaimed their losses on Friday, thanks to an impressive batch of technology earnings. The major indices finished the week in positive territory, with the Nasdaq, the Dow, and the S&P 500 adding 1.1%, 0.5%, and 0.2%, respectively. The S&P 500 and the Nasdaq settled Friday at new all-time highs.
The S&P 500's technology sector (+2.9%) kept the broader market afloat with little help from its peers, easily settling at the top of the sector standings. The group was underpinned by Microsoft (MSFT), Alphabet (GOOG), and Intel (INTC), which added between 4.8% and 7.4% on Friday after reporting better-than-expected earnings and revenues for the third quarter.
Amazon (AMZN) also surged on Friday, jumping 13.2%, after beating both top and bottom line estimates. The company's positive performance boosted the consumer discretionary sector, which finished the week with a gain of 1.1%.
On the downside, the health care sector (-2.1%) struggled this week, with biotechnology names leading the retreat. Celgene (CELG) showed particular weakness, ending the week lower by 19.1%, after missing revenue estimates for the third quarter and lowering its 2020 long-term financial targets on Thursday.
The consumer staples sector also lagged, moving lower by 1.5%. Within the group, CVS Health (CVS) plunged 9.8% following unconfirmed reports that the pharmacy retailer has made an offer to acquire managed health care company Aetna (AET) for more than $200 per share. Aetna shares ended the week higher by 7.6%.
On the data front, the advance GDP report showed that the U.S. economy increased at annual rate of 3.0% in the third quarter (Briefing.com consensus 2.4%), marking the second straight quarter the annualized rate has been 3.0% or higher. However, the headline number was inflated by a change in inventories, while real final sales decelerated to 2.3% from 2.9% in Q2.
In other words, the U.S. economy is proceeding largely at the same ho-hum pace.
Elsewhere, speculation as to who will become the next Fed Chair continued this week, and it appears increasingly likely that current Fed Chair Janet Yellen will be replaced by either Fed Governor Jerome Powell or Stanford University economist John Taylor. Bloomberg reported on Friday that President Trump is leaning toward Mr. Powell.
Following this week's events, the CME FedWatch Tool places the chances of a December rate hike at 99.9%, up from 93.1% last week.
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