Alaric Securities celebrates at Nasdaq MarketSite
July 28, 2017

Dow Ends at Record, but Tech Slump Weighs on S&P 500, Nasdaq

Alaric Securities

he Dow Jones Industrial Average closed at a record on Thursday driven by earnings-fueled gains in Verizon and Boeing, but the broader market finished in negative territory due to a firm slump in technology stocks.

The Dow DJIA  ended 85.54 points, or 0.4%, higher at 21,796.55, powered by a rally in shares of Boeing Co. and Verizon Communications Inc. VZ.

Technology-weighted indexes, however took a beating.

The Nasdaq Composite Index COMP closed 40 points, or 0.6% to 6,382, but off its worst levels. At its intraday low during the midday pullback, the Nasdaq was down 104 points, or 1.6%, before paring that steep drop. Apple Inc. AAPL  shares weighed on the index with a 1.9% decline.

The S&P 500 index SPX ended off 2.41 points, or 0.1%, to 2,475.42, weighed by those technology declines, health-care and industrials. Gains in telecoms, energy, the consumer sectors, helped to moderatrwe the broad-market gauge’s decline.

The downturn in tech came despite better-than-expected results late Wednesday from social-media giant Facebook Inc. FB The company could be nearing a $500 billion market cap if shares maintain their strength throughout the session. The stock has already jumped nearly 50% thus far this year.

 Facebook is one of the so-called FAANG stocks, a reference to the quintet of technology and internet names (Facebook, Apple, Amazon AMZN, Netflix NFLX and Google-parent Alphabet Inc. GOOG, GOOGL that have powered market returns thus far this year. However, those sharp gains have also raised questions over valuations.

“After Facebook earnings, people are getting jittery about valuations so there’s a rebalancing going on,” said Diane Jaffee, senior portfolio manager at TCW. Jaffee said the broad weight upon tech stocks, as shown by the drop in Apple, was likely driven by exchange-traded funds.

A drop in the Dow Jones Transportation Average DJT, which was down 3.6%, also offered a warning signal for an equities pullback.

“There has been a marked divergence between Dow Transports and Dow Industrials and whenever this happens people like to reduce risk,” said Ian Winer, head of the equities division at Wedbush Securities. “And the best way to reduce risk right now is by selling overvalued tech stocks.”

Among other corporate results, Procter & Gamble Co. PG, rose 1.6% after the Dow component posted a fourth-quarter profit that was above expectations. United Parcel Service Inc. UPS,  fell 4% despite its results topping consensus forecasts.

MasterCard Inc. MA also reported stronger-than-expected earnings and revenue for the second quarter as consumers boosted their spending. Shares fell 1.6%.

Twitter TWTR tumbled 14%, biggest one-day drop since October, after the microblogging platform reported lackluster user growth.

PayPal Holdings Inc. PYPL shares rose 2.3% after the mobile payment group topped earnings views and raised guidance.

After the market close, Amazon.com Inc. AMZN was scheduled to report its quarterly results, along with Expedia Inc. EXPE,  Intel Corp. INTC,  Starbucks Corp. SBUX,  and Mattel Inc. MAT.

Overseas companies with U.S.-listed shares were also active. AstraZeneca PLC AZN, sank 15% after the drug heavyweight reported a negative result in a Phase 3 clinical trial of its lung-cancer treatment Mystic. Shares of rival Bristol-Meyer Squibb Co. BMY,  fell 3.1% after its results.

Anheuser-Busch InBev NV BUD,  ABI,  moved 6.2% higher after the brewing giant posted a surge in quarterly profit.

Economic data: The number of Americans who applied for first-time unemployment benefits rose in late July but remained near the lowest level in decades. Separately, orders for durable or long-lasting U.S. goods soared 6.5% in June.

Other markets: European stocks SXXP, traded mixed as investors absorbed a heavy stream of earnings, while in Asia ADOW, equity markets were broadly positive.

Gold prices GCQ7,  settled up 0.9% at $1,260 an ounce, with precious and base metals rising across the board, while oil prices CLU7, rose 0.6% at settle at $49.04 a barrel.

The ICE Dollar Index DXY,   climbed following an earlier decline, and was last trading up 0.3% at 93.90. The dollar weakened on Wednesday, after some analysts viewed the Federal Reserve as striking a dovish tone in its policy statement.

Article originally published by Wallace Witkowski and Anora Mahmudova at maketwatch.com