Wob­bles aside, stocks end week with gains

In­dus­tri­als, en­ergy climb; banks don’t ex­cite in­vestors.

Austin American-Statesman - - MONEY & MARKETS - By Mar­ley Jay

Stocks wrapped up an­other solid week Fri­day as in­dus­trial and en­ergy com­pa­nies ticked higher, but cor­po­rate earn­ings got off to a slug­gish start as re­ports from sev­eral ma­jor U.S. banks failed to ex­cite in­vestors.

In­dexes wob­bled in morn­ing trad­ing, but ris­ing oil prices helped en­ergy com­pa­nies, and de­fense con­trac­tors and ma­chin­ery mak­ers also rose. Con­sumer-fo­cused com­pa­nies like Ama­zon set record highs.

Wells Fargo skid­ded af­ter re­port­ing a drop in earn­ings as fall­out con­tin­ued from its phony ac­counts scan­dal. Cit­i­group also fell af­ter its rev­enue growth was weak. AT&T skid­ded af­ter the Jus­tice De­part­ment asked a court to over­turn the com­pany’s pur­chase of Time Warner.

In­vestors ex­pect an­other round of great profit growth this quar­ter, but they’re not sure about what will come next: the U.S. and China are in a trade war with­out any signs of res­o­lu­tion, midterm Con­gres­sional elec­tions are get­ting closer, and in­ter­est rates keep ris­ing. Paul Christo­pher, head of global mar­ket strat­egy for the Wells Fargo In­vest­ment In­sti­tute, said in­vestors will fo­cus on cor­po­rate fore­casts cov­er­ing the rest of the year.

“We think there will be a lot of at­ten­tion paid to the out­look,” he said. “We still think the econ­omy is re­ally what in­vestors should be watch­ing here, and we think it’s go­ing to be solid this year and again good next year.”

Ma­jor in­dexes rose for the se­cond con­sec­u­tive week fol­low­ing mod­est losses over the pre­vi­ous two weeks. In­vestors con­tin­ued to wa­ver be­tween op­ti­mism about the grow­ing U.S. econ­omy, and the strong com­pany earn­ings that come with it, and wor­ries that the trade war and other com­mer­cial dis­putes could set back global eco­nomic growth.

Wells Fargo, the largest U.S. mort­gage lender, posted a smaller profit than an­a­lysts ex­pected. Its stock gave up 1.2 per­cent to $55.36. Citi fell 2.2 per­cent to $67 and JPMor­gan Chase dipped 0.5 per­cent to $106.36.

While bank prof­its are surg­ing this year, their stocks are not. Much of the profit growth has come from last year’s cor­po­rate tax cuts rather than a big im­prove­ment in the banks’ busi­nesses. In­vestors have also wor­ried about the shrink­ing gap be­tween short­term in­ter­est rates and longer-term ones be­cause banks make a lot of their money by bor­row­ing money at short­term rates and lend­ing it out over the long term.

While in­vestors are tak­ing money out of fi­nan­cials, they are more op­ti­mistic about tech­nol­ogy com­pa­nies and re­tail­ers, which are ex­pected to post even stronger earn­ings growth later this sum­mer. On Fri­day Ama­zon rose 0.9 per­cent to $1,813.03 and Mi­crosoft added 1.2 per­cent to $105.43.

AT&T dropped 1.7 per­cent to $31.67 af­ter the Jus­tice De­part­ment moved to challenge its re­cent pur­chase of Time Warner. The $85 bil­lion deal closed last month af­ter a fed­eral judge ruled that it did not vi­o­late an­titrust law, but the gov­ern­ment is ask­ing a higher court to re­con­sider that rul­ing.

Bench­mark U.S. crude rose 1 per­cent to $71.01 a bar­rel in New York while Brent crude, used to price in­ter­na­tional oils, rose 1.4 per­cent to $75.33 per bar­rel in Lon­don.

Devon En­ergy ad­vanced 1.8 per­cent to $44.72 and Exxon Mo­bil rose 0.7 per­cent to $83.31.

John­son & Johnston lost 1.4 per­cent to $125.93 af­ter a St. Louis jury awarded al­most $4.7 bil­lion in damages to 22 women and their fam­i­lies af­ter they claimed as­bestos in John­son & John­son tal­cum pow­der con­trib­uted to their ovar­ian cancer.

Bond prices moved higher. The yield on the 10-year Trea­sury note fell to 2.83 per­cent from 2.85 per­cent.

Gold lost 0.4 per­cent to $1,241.20 an ounce. Sil­ver fell 1 per­cent to $15.82 an ounce. Cop­per lost 0.1 per­cent to $2.78 a pound.

While the stronger dol­lar has sent gold and sil­ver prices lower, the losses for cop­per have been es­pe­cially steep. Cop­per fu­tures have fallen for five straight weeks, down 16 per­cent over that time, a sign that in­vestors are wor­ried the trade war will im­pair con­struc­tion, man­u­fac­tur­ing and power gen­er­a­tion.

Whole­sale gaso­line rose 1.7 per­cent to $2.11 a gal­lon. Heat­ing oil added 0.5 per­cent to $2.13 a gal­lon. Nat­u­ral gas sank 1.6 per­cent to $2.75 per 1,000 cu­bic feet.

The dol­lar rose to 112.30 yen from 112.46 yen. The euro edged up to $1.1677 from $1.1670.


AT&T dropped 1.7 per­cent to $31.67 af­ter the Jus­tice De­part­ment moved to challenge its re­cent pur­chase of Time Warner.

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