Markets lower for the week as Fed signals small rate cut

U.S. stocks wavered in the past week, torn between mixed corporate earnings reports and shifting expectations of Federal Reserve intervention later this month.

On Friday, the Fed appeared to play down chances of a large interest-rate cut, sending stocks lower. The clarification from the central bank came a day after New York Fed President John Williams said central banks must take swift action when faced with adverse economic conditions, which some investors interpreted as signaling a half-percentage-point rate cut in July. Mr. Williams’s statement sparked a rise in major indexes on Thursday.

The S&P 500 ended the last day of the week down 18.50 points, or 0.6%, to 2976.61, while the Dow Jones Industrial Average lost 68.77 points, or 0.3%, to 27154.20. The Nasdaq Composite dropped 60.75 points, or 0.7%, to 8146.49. All three indexes ended the week lower, though they are still up more than 1% in July following big rises in June.

European shares ended only marginally higher on Friday as worries about the stability of Italy’s government. The uncertainty surrounding the political situation in Italy remains relatively high, especially with discussions about the budget coming in later in the year, and it is translating into risk for the moment. The pan-European STOXX 600 closed up 0.12% after rising as much as 0.7% in morning trade, with Italy's blue-chip stocks FTMIB falling 2% to two-week lows.

In Asia, most benchmark gauges traded higher. Hong Kong’s Hang Seng Index rose 1.1%, buoyed by consumer-goods companies, and finished the week up 1%. Japan’s Nikkei 225 index climbed 2% but fell 1% for the week.

The yield on the 10-year Treasury note declined this week to 2.048%, while the 2-year-note yield, sensitive to shifting expectations for Fed policy, fell to 1.813%. Secondquarter earnings also swung individual companies, as the first big week of businesses reporting results came to a close with many exceeding beaten-down expectations. Companies that have fallen short of estimates have been swiftly punished by traders, but their losses haven’t been enough to make a big dent in the broader market’s recent gains.

On Friday, the price of oil rose, rebounding from the month’s lows and marking a second day of price volatility. Iran denied that the U.S. Navy downed one of its drones in the Strait of Hormuz, following several close encounters between American warships and the Iranian military on Thursday in the vital oil shipping route that have further raised tensions between the nations.