Tech firms and banks fall, pulling stocks back from record highs
Falling technology and financial stocks pulled U.S. indexes back from the edge of record highs Friday. Bond yields gave up some of their big gains from the last few days, and the dollar downshifted from its sharp climb against other currencies.
The Standard & Poor’s 500 index fell 3.96 points, or 0.2%, to 2,258.07. It had wobbled up and down through the day, never up by more than 0.3% or down by more than 0.3%.
The Dow Jones industrial average fell 8.83 points, or less than 0.1%, to 19,843.41. The Nasdaq composite fell 19.69, or 0.4%, to 5,437.16 after climbing above its record closing level earlier in the day. All three indexes remain within 1% of their record highs.
Friday’s moves ended a week in which stocks slowed their sharp ascent since last month’s presidential election, and bond yields and the dollar continued their big gains. A driving force was the Federal Reserve’s move Wednesday to raise interest rates for only the second time in a decade and indicate several more increases may be in store for 2017.
The dollar gave back a smidgen of its gains Friday. The ICE U.S. Dollar index, which measures the dollar against six other currencies, slipped 0.2%. The index remains close to its highest level in 14 years.
The yield on the 10-year Treasury note likewise regressed a bit Friday, slipping to 2.59% from 2.60% late Thursday. It’s still near its highest level since 2014.
Friday’s drop in yields helped drive up stocks that pay big dividends. They often trade in the opposite direction of interest rates on expectations that income investors will buy them when bond yields are dropping. Those sectors had struggled in recent days.
Utility stocks and real-estate investment trusts rose 1.2% on Friday, the largest gains among the 11 sectors that make up the S&P 500.
Banks and other financial stocks fell in a rare off day. The sector has been cruising since last month’s election on expectations that higher interest rates will boost their profits.
Financial stocks in the S&P 500 fell 0.9%. Bank of America fell 2.2% to $22.66.
Technology stocks in the S&P 500 fell 0.8%. Software giant Oracle dropped 4.3%, to $39.10, after reporting quarterly revenue that fell short of analysts’ expectations.
Adobe Systems fell 1.5% to $103.55 after the software maker issued a full-year profit forecast that disappointed analysts.
Despite drops for the S&P 500 and other indexes, more stocks rose on the New York Stock Exchange than fell.
Among them was Chipotle Mexican Grill, which jumped 2.5% to $392.07. The restaurant chain said four new directors will join its board as part of an agreement with activist investor Bill Ackman’s Pershing Square.
Jabil Circuit leaped 12% to $24.15 after reporting stronger earnings for its latest quarter than analysts expected.
Big gains since last month’s election mean stocks generally are more expensive relative to their earnings, a key gauge investors use to measure whether the market is overpriced.
The S&P 500 is trading at about 19 times its earnings per share over the last 12 months, according to FactSet. That compares with its average price-earnings ratio of 15.6 over the last 15 years and is an indication that stocks are, if not expensive, no longer cheap. That, in turn, implies lower future returns than the big gains investors have enjoyed since the Great Recession’s end.
“I do think we’re in a low-return environment,” says Bernie Williams, chief investment officer for USAA’s Wealth Management Investment Solutions. “Of course, we thought that at the start of this year too, and here we are up 10%.”
In foreign stock markets, Japan’s Nikkei 225 gained 0.7%, South Korea’s Kospi rose 0.3% and Hong Kong’s Hang Seng fell 0.2%. In Europe, Germany’s DAX rose 0.3%, France’s CAC 40 rose 0.3% and Britain’s FTSE 100 rose 0.2%.
U.S. benchmark crude oil rose $1 to $51.90 a barrel in New York. Brent crude, the international standard, rose $1.19 to $55.21 a barrel. Natural gas slipped nearly 2 cents to $3.415 per 1,000 cubic feet, wholesale gasoline rose 1.5 cents to $1.56 a gallon and heating oil rose 3 cents to $1.67 a gallon.
Gold rose $7.60 to $1,137.40 an ounce — recovering a bit from Thursday, when it fell to its lowest price in 10 months. Silver rose nearly 26 cents to $16.22 an ounce. Copper fell 3.6 cents to $2.56 a pound.
The euro rose to $1.0433 from $1.0424, the British pound rose to $1.2476 from $1.2436 and the dollar climbed to 118.01 yen from 117.93 yen.
UPDATES:
2:40 p.m.: This article was updated with closing prices, context and analyst comment.
7:30 a.m.: This article was updated with more recent market information.
This article was originally published at 6:55 a.m.
