By Barbara Kollmeyer, MarketWatch , Ryan Vlastelica
Facebook sees biggest one-day drop since September
U.S. stock-market indexes closed at records on Friday and booked
weekly gains, as investors remained optimistic over the economy and
the state of American corporations as the fourth-quarter earnings
season began.
The U.S. stock market will be closed on Monday
(http://www.marketwatch.com/story/which-markets-are-closed-on-martin-luther-king-day-2018-01-11)
for Martin Luther King Jr. Day.
What are stock indexes doing?
The Dow Jones Industrial Average rose 228.46 points, or 0.9%, to
25,803.19 and gained 2% over the week.
The S&P 500 added 18.68 points, or 0.7%, to 2,786.24,
booking a 1.6% gain over the week. Friday's gains were broad, with
eight of the 11 primary S&P 500 sectors finishing in positive
territory. Consumer-discretionary and energy shares led the gains,
up 1.3% and 1% respectively.
This is the second straight weekly gain for both the Dow and the
S&P, as well as their seventh positive week of the past
eight.
The Nasdaq Composite Index rose 49.28 points to 7,261, a gain of
0.7%. The tech-heavy index rose 1.7% over the past week, its second
consecutive weekly advance.
The Russell 2000 index of small stocks rose 4.9 points, or 0.3%,
to 6,758.54 and gained 2% over the week, its biggest weekly advance
since September.
What is driving the markets?
Fourth-quarter earnings season unofficially kicked off on
Friday, with results from a number of major financial institutions,
a sector analysts expect to put in a mixed performance
(http://www.marketwatch.com/story/bank-earnings-will-be-moderate-mixed-messy-and-muddied-but-theres-some-good-news-2018-01-10).
Earnings growth is expected to be strong this quarter, although the
recently passed tax law out of Washington is expected to "muddy"
some results
(http://www.marketwatch.com/story/the-tax-bill-could-muddy-what-fourth-quarter-results-say-about-fundamentals-goldman-writes-2018-01-08),
according to Goldman Sachs.
JPMorgan Chase & Co.(JPM) reported a 37% drop in earnings
(http://www.marketwatch.com/story/jpmorgans-profit-slides-37-hurt-by-tax-bill-2018-01-12),
although this was largely related to one-time charges associated
from the new tax law, which is expected to provide further gains
over the longer term. Wells Fargo & Co. (WFC) reported earnings
and revenue that came in below consensus
(http://www.marketwatch.com/story/wells-fargo-shares-slip-14-premarket-after-profit-and-revenue-miss-2018-01-12)
analyst forecasts in the fourth quarter. Shares of J.P. Morgan rose
1.6% while Wells lost 0.7%.
BlackRock Inc. (BLK) reported earnings that came in above
expectations
(http://www.marketwatch.com/story/blackrock-tops-estimates-as-net-flows-set-record-2018-01-12),
helped by the massive inflows into the company's iShares line of
exchange-traded funds. Shares jumped 3.3%.
Read:What to expect when Goldman Sachs and Morgan Stanley report
earnings
(http://www.marketwatch.com/story/what-to-expect-when-goldman-sachs-and-morgan-stanley-report-earnings-2018-01-11)
Plus: Big bank stocks have plenty of juice left--here's why
(http://www.marketwatch.com/story/big-bank-stocks-have-plenty-of-juice-left-heres-why-2018-01-12)
Separately, German Chancellor Angela Merkel's conservative CDU
party and Martin Schulz's center-left SPD
(http://www.marketwatch.com/story/merkels-party-makes-breakthrough-in-german-government-coalition-talks-2018-01-12)reached
an agreement on a blueprint for formal coalition negotiations
(http://www.marketwatch.com/story/merkels-party-makes-breakthrough-in-german-government-coalition-talks-2018-01-12).
This was seen as a sign of political stability in the eurozone's
biggest economy, and it supported the euro, which in turn led to a
decline in the U.S. dollar. A weaker greenback is seen as providing
a tailwind for the profits of multinational companies. The iShares
MSCI Germany ETF(EWG) rose 1.2%.
U.S. retail sales rose 0.4%
(http://www.marketwatch.com/story/us-retail-sales-rise-04-in-december-cpi-up-01-2018-01-12)
in December, the fourth straight monthly gain, although it was
slightly below the 0.5% increase that analysts had forecast. The
consumer-price index rose 0.1% in December.
What are strategists saying?
"The economy is looking good, numbers look good, and companies
are making money. This quarter may be a little messy because of the
tax bill, but there's so much optimism, so much enthusiasm about
earnings," said Michael Matousek, head trader at U.S. Global
Investors. "Things are really starting to take off, and the only
thing that makes it scary is the idea that we may be culminating to
a top in the market."
Stocks have been in an essentially uninterrupted uptrend for
years, and the S&P 500 is poised to go a historic length of
time
(http://www.marketwatch.com/story/heres-another-milestone-the-sp-500-could-surpass-this-month-2018-01-03)
without a dip of even 5%. Volatility has also been historically low
(http://www.marketwatch.com/story/the-last-time-stocks-were-this-quiet-was-the-year-the-beatles-went-on-ed-sullivan-2017-12-14).
"The move isn't about fundamentals anymore, but the overall
euphoria," said Jason Browne, chief investment officer of FundX
Investment Group. "When we do get negative moves we don't hold
them; the environment pushes people to buy dips. Will that last
forever? Of course not. You have to hope people are being
realistic."
Which stocks are in focus?
Shares of Facebook Inc.(FB) fell 4.5%, in what is on track to be
its biggest one-day percentage loss since September. The decline
came after Chief Executive Mark Zuckerberg, in a blog post
published late Thursday, said the social-media website will
prioritize personal posts from family and friends
(http://www.marketwatch.com/story/facebook-announces-big-changes-that-will-put-friends-ahead-of-business-2018-01-11)
over business and news media posts. He acknowledged the move could
come at the expense of the company's bottom line.
GameStop Corp.(GME) sank 11% after it reported a big jump in
holiday sales, but said it would take impairment charges
(http://www.marketwatch.com/story/gamestops-stock-drops-after-revealing-large-charge-related-iphone-x-related-woes-2018-01-12)
of $350 million to $400 million related to its technology brands
business.
Shares of Snap Inc.(SNAP) fell 3.4% after it was downgraded to
underperform at Raymond James.
Read: ADT is planning a $2 billion IPO: Here are 5 things you
need to know
(http://www.marketwatch.com/story/5-things-to-know-about-security-firm-adt-ahead-of-its-ipo-2018-01-10)
What are other markets doing?
In Europe, equity gains were checked by a strong euro, with the
Stoxx 600 index up 0.3%.
Stocks in Asia closed mostly higher
(http://www.marketwatch.com/story/hong-kong-climbs-to-13th-straight-day-of-gains-as-asian-markets-rebound-2018-01-11),
but Japan's Nikkei 225 index fell 0.2%.
Gold rose 1.2%
(http://www.marketwatch.com/story/gold-prices-push-to-fresh-four-month-highs-as-investors-wait-for-inflation-data-2018-01-12)
as the dollar fell. The ICE dollar index tumbled 1% to 90.94, with
losses concentrated against the euro
(http://www.marketwatch.com/story/euro-hits-3-year-high-on-breakthrough-for-german-coalition-talks-dollar-weak-ahead-of-data-2018-01-12),
which hit a three-year high against the dollar at $1.2205.
(http://www.marketwatch.com/story/oil-prices-log-3-year-highs-before-trump-issues-iran-sanction-decision-2018-01-11)Oil
prices
(http://www.marketwatch.com/story/oil-prices-slip-from-3-year-high-as-traders-wait-for-trump-move-on-iran-2018-01-12)
resumed their climb, trading near 3-year highs, as Trump extended
temporary waivers on U.S. sanctions against Iran, as expected. The
West Texas Intermediate February contract was last up 0.9% at
$64.40 a barrel.
Read:Trump will extend waiver on sanctions relief for Iran, say
sources
(http://www.marketwatch.com/story/trump-decides-to-extend-waiver-on-sanctions-relief-for-iran-say-sources-2018-01-12)
In cryptocurrencies, the bitcoin spot price rose 2.7% to
$13,640. Bitcoin futures on the CME Group Inc. rose 1.5% to
$13,590.
--Anora Gaudiano contributed to this article.
(END) Dow Jones Newswires
January 12, 2018 16:33 ET (21:33 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.