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Stocks close mostly lower amid earnings, world politics

CNBC logo CNBC 5/25/2018 Thomas Franck

Stocks ended mixed Friday as geopolitical fears after President Donald Trump's move to cancel a key summit with North Korea offset solid corporate earnings.

The Dow lost 58 points, led lower by Chevron and Caterpillar The S&P 500 declined 0.25 percent amid continued losses in energy and financial stocks.

Both sectors were under pressure this week as a decline in oil prices weighed on industry leaders like Exxon Mobil and Chevron, while lower interest rates dragged on bank stocks.

U.S. West Texas Intermediate crude settled $2.83 lower at $67.88 a barrel, a 4 percent loss. After six weeks of gains, WTI lost about 5 percent for the week, its biggest loss since early February.

Brent crude futures were down $2.42, or 3.1 percent, at $76.37 a barrel. The contract hit its highest since late 2014 at $80.50 last week. Brent is down about 3 percent this week, its largest weekly percentage loss since early April.

The rate on the benchmark 10-year Treasury fell roughly 15 basis points this week. The Federal Reserve's May meeting minutes showed the central bank may be willing to let inflation run a little hotter than its two percent goal. A pivot to safer asset classes in the wake of geopolitical concerns has also helped send rates lower.

The Nasdaq closed slightly higher on gains in Netflix and Apple. Trading volume was below its recent trend this week as traders left Wall Street ahead of the long weekend. Markets will be closed Monday for Memorial Day.

A string of solid earnings reports has helped keep equities on track for weekly gains, with Foot Locker adding to the optimism Friday.

The athletic shoe retailer handily beat Wall Street expectations, posting adjusted earnings per share of $1.45 versus expectations of $1.24 per share. It posted revenue of $2.03 billion, also ahead of estimates.

The company's stock rose 12 percent following the report.

"At the end of the day, it's going to come down to earnings and the ability of companies to beat," said Jeremy Klein, chief market strategist at FBN Securities. "Things are quiet ahead of the holiday ... [but] there's nothing to suggest corporate earnings in the next couple quarters will be any less impressive."

Several other S&P 500 components also gave investors reason for optimism throughout the week, including home improvement retailer Lowe's.

Though the Mooresville, N.C., company missed expectations for the first quarter on Wednesday, its stock rose more than 10 percent after it maintained its annual financial targets.

Shares also rallied after famed hedge fund manager Bill Ackman revealed a $1 billion stake in the company; the stock is up more than 12 percent since Tuesday's close.

High-end jeweler Tiffany & Co., meanwhile, is having one of its best weeks on Wall Street.

The company's stock rose more than 23 percent after reporting that same-store sales rose 7 percentin the quarter, overshooting expectations of only 2.6 percent. It also raised its full-year guidance in light of the solid beat.

The New York company suggested its comeback plan is working to retain price-conscious millennial shoppers from drifting to new competitors. 

The generally buoyant sentiment after the earnings numbers was tempered after President Trump's abrupt decision to scrap a landmark summit with North Korean leader Kim Jong Un. The meeting would have been the first face-to-face encounter between a sitting U.S. president and a North Korean premier.

In response, Pyongyang's vice foreign minister said the country still hoped for a "Trump formula," before adding the Asian state would remain open to resolving long-standing issues with the world's largest economy. This helped market sentiment to recover Friday morning with European stocks posting solid gains.

The Stoxx Europe 600 fell 0.1 percent Friday, while the Korean Kospi lost 0.2 percent.

U.S. stocks finished lower on Thursday on the news of the canceled summit in Singapore. The Dow fell 75 points to finish at 24,811.76 by the closing bell, well off a 280-point drop immediately after Trump's statement.

New orders for U.S.-made capital goods increased more than expected in April, hinting that business spending on equipment was accelerating after a slowdown toward the end of the first quarter.

The Commerce Department said Friday that orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 1 percent last month. Economists polled by Reuters had forecast core capital goods orders rising 0.7 percent last month.

Overall orders for durable goods, items ranging from toasters to aircraft that are meant to last three years or more, dropped 1.7 percent in April.


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