Stocks were mixed on Friday as investors digested new commentary on asset-purchase tapering and inflation from Federal Reserve Chair Jerome Powell, amid a slew of fresh earnings reports from major companies.
The Dow set a record closing high, taking out a previous record close from August 16. The S&P 500 retreated after setting a fresh intraday record high. The reversal to the downside came as Powell said the central bank was "on track to begin a taper of our asset purchases that, if the economy evolves broadly as expected, will be completed by the middle of next year" during a virtual event hosted by the South African Reserve Bank Friday. The central bank had previously telegraphed it believed the economy was nearing the recovery threshold that would warrant the start to tapering of the Fed's crisis-era asset purchase program.
Powell also noted he expected elevated inflationary pressures spurred by global supply constraints "are likely to last longer than previously expected, likely well into next year."
The Nasdaq underperformed following a couple of weaker-than-expected technology earnings.
Snap (SNAP) shares sank by a record 27% after missing third-quarter revenues and offering weak current-quarter guidance, with Apple's iOS privacy updates denting the social media platform's advertising business. The miss also catalyzed a drop in shares of peer social media companies including Facebook (FB) and Alphabet (GOOGL).
Shares of Intel (INTC) also dropped after the company said margins would be under pressure for the next up to three years, in part reflecting challenges from global materials shortages. And Chipotle (CMG) shares fluctuated between small gains and losses despite posting better-than-expected quarterly same-store sales, though the company flagged widespread staffing shortages.
Despite some of the more recent, mixed earnings results, the S&P 500 and Dow have hovered within striking distance of their all-time highs, boosted by a string of earlier estimates-topping quarterly corporate profits and economic data. Both have served to stave off concerns over a decelerating growth environment after a surge in reopening activity earlier this year.
New data on Thursday showed weekly jobless claims improved to their lowest level since March 2020 last week, falling more-than-expected as firings, layoffs and other involuntary separations slowed further in the labor market. And existing home sales posted their biggest jump since September 2020 last month, showing still-robust demand for homes even as inventory remained tight and prices crept higher.
And based on quarterly results so far, many companies have shown they managed to grow profits even in the face of rising input and labor costs and supply chain challenges.
“Let’s not forget, we’re coming off of very high margins, so there is room for a little compression there. What we’re seeing in the early earnings releases, which is maybe the reason for equity markets hitting new highs, is that the operating leverage inside of companies right now is so significant,” Gibson Smith, Smith Capital Investors founder, told Yahoo Finance Live on Thursday. "Think of top-line growth in the 18% arena, or you see bottom-line growth in the 50, 60, 70%. These are all positives for corporate America, and I think will actually be the fuel to launch equity prices to higher levels.”
Investors are hoping for more affirmation on the solid trends seen so far in corporate profits next week, with a more robust set of third-quarter earnings results due for release. The heavily weighted stock index components, from Apple to Amazon and Facebook, are set to report quarterly results throughout next week.
4:13 p.m. ET: Stocks end mixed, Dow logs record close
Here's where markets closed out Friday's session:
S&P 500 (^GSPC): -4.88 (-0.11%) to 4,544.90
Dow (^DJI): +73.94 (+0.21%) to 35,677.02
Nasdaq (^IXIC): -125.5 (-0.82%) to 15,090.20
11:37 a.m. ET: American Express shares jump to a record after strong Q3 results, while VF Corp. slides on lingering manufacturing constraints
American Express (AXP) shares hit an intraday all-time high Friday morning after posting third-quarter results that easily topped estimates.
Revenue of $10.93 billion was up 25% over last year, and exceeded the $10.54 billion expected, according to Bloomberg consensus data. Earnings per share of $2.27 were also better than the $1.77 estimate.
American Express also issued upbeat commentary on the state of the U.S. consumer, suggesting spending among individuals and small businesses was rebounding to pre-virus levels.
The card company said it saw a “continued rebound in travel and entertainment spending, with restaurant spending notably resilient, growing above pre-pandemic levels." It also noted consumer and small business spending on goods and services grew 19% over the third quarter of 2019, on a currency adjusted basis. New users to premium Platinum and Gold Cards also reached all-time highs
Meanwhile, VF Corp.'s (VFC) posted disappointing quarterly results in a report also issued Friday morning, reflecting the negative impacts from ongoing supply-chain challenges for apparel-makers.
The parent company of brands including The North Face and Vans posted adjusted earnings from continuing operations of $1.11, or four pennies below estimates, for its fiscal second quarter. Revenue came in $3.2 billion, or a 23% jump over last year but still a miss compared to the $3.5 billion consensus estimate.
VF Corp attributed the miss to a resurgence of Covid-19 lockdowns in its key sourcing companies, which generated manufacturing capacity constraints during the quarter.
“Additionally, continued port congestion, equipment availability and other logistics challenges have contributed to increasing product delays,” the company added. “VF is working with its suppliers to minimize disruption and is employing expedited freight as needed.”
11:13 a.m. ET: U.S. service sector activity expands at a faster-than-expected clip in October, while manufacturing activity decelerates slightly
U.S. service sector activity picked up by a greater-than-expected margin in early October, while ongoing supply chain constraints weighed on goods-producing industries, according to new data from IHS Markit on Friday.
IHS Markit's U.S. services purchasing managers' index rose to 58.2 in the preliminary October print, exceeding consensus estimates for a reading of 55.2, according to Bloomberg data. The PMI had come in at 54.9 in September, and the latest October print reflected the strongest growth in three months. Readings above the neutral level of 50.0 indicate expansion in a sector.
"Driving growth in October was the quickest rise in inflows of new work since July, that was commonly attributed to stronger demand conditions as COVID-19 worries eased during the month," IHS Markit said in its release. "Concurrently, service providers recorded more intense capacity pressures amid reports that firms were struggling to cope with growing sales due to labour issues and supplier delays."
The manufacturing sector, however, posted a larger-than-expected dip in its PMI compared to September, largely reflecting the impact of rising input costs and materials and labor shortages. The U.S. manufacturing PMI slipped to 59.2 in early October from 60.7 in September, marking a third straight monthly decline. Consensus economists were looking for a reading of 60.5 in October.
"The slower improvement in conditions reflected a weaker expansion in output and a moderation in order book growth during October," IHS Markit said in its release. "Factory production rose only modestly, with the pace of increase the slowest since July 2020 as output continued to be hampered by supply chain issues and shortages. October saw a record lengthening of suppliers’ delivery times. Supply issues and sustained sales growth prompted firms to further increase their buying activity and inventories."
9:32 a.m. ET: Stocks open mostly lower amid mixed earnings
Stocks were mixed as markets opened for trading on Friday, but still paced toward weekly gains following a record-setting march higher earlier this week.
The Dow traded higher by just 22 points, or less than 0.1%, shortly after the opening bell. Both the Nasdaq and S&P 500 dropped as technology stocks sank following earnings misses from Snap and Intel. U.S. crude oil prices rose more than 1% to break back above $83 per barrel, while the 10-year Treasury yield hovered around 1.67%.
7:21 a.m. ET Friday: Stock futures trade mixed, with Nasdaq under pressure
Here's where markets were trading ahead of the opening bell:
S&P 500 futures (ES=F): +4.75 points (+0.1%), to 4,546.5
Dow futures (YM=F): +59 points (+0.17%), to 35,539.00
Nasdaq futures (NQ=F): -25.75 points (-0.17%) to 15,453.00
Crude (CL=F): +$0.54 (+0.65%) to $83.04 a barrel
Gold (GC=F): +$11.50 (+0.65%) to $1,793.40 per ounce
10-year Treasury (^TNX): unchanged, yielding 1.674%
6:07 p.m. ET Thursday: Stock futures edge lower
Here's where markets were trading Thursday evening:
S&P 500 futures (ES=F): -13.25 points (-0.29%), to 4,528.50
Dow futures (YM=F): -31 points (-0.09%), to 35,449.00
Nasdaq futures (NQ=F): -93.75 points (-0.61%) to 15,385.00
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter