U.S. equities mostly moved lower on Friday in what was a volatile session. Large-cap stocks traded between a gain of nearly 1% and a loss of 0.5% before finishing fractionally lower.
Sneaker giant Nike (NYSE:NKE) gained a whopping 8.9% after reporting better-than-expected quarterly results on strong top-line growth. Analysts are excited about the brand’s momentum, innovation pipeline and successes in China.
In the end, the Dow Jones Industrial Average gained 0.7%, the S&P 500 Index lost 0.1%, the Nasdaq Composite fell 1% and the Russell 2000 took a 1.3% slide.
Treasury bonds weakened slightly, while the dollar strengthened and gold lost 0.7%. Crude oil moved higher, adding 1.4% to close at $45.55.
Financial stocks led the way with a 1.5% gain followed by defensive utility stocks — the subject of a recent post — which gained 1%. Healthcare led the decliners with a 2.7% loss driven by weakness in biotechs. The Biotech iShares (NASDAQ:IBB) lost 4.9% as one of the favorite areas for momentum traders in recent months rolls over badly in the wake of comments on Monday from Democratic presidential contender Hillary Clinton about expensive prescription drug prices.
The drop caps a six-day losing streak of 14.4% for the IBB fund with holdings including Celgene (NASDAQ:CELG), Amgen (NASDAQ:AMGN) and Gilead Sciences (NASDAQ:GILD). From the high set on July 20, biotechs are down 26%. Ouch.
And while NKE soared, athletics retailer Finish Line (NASDAQ:FINL) dropped nearly 20% on light comp-store sales and concerns about NKE’s plans to reduce elevated North American inventories.
On the economic front, second-quarter gross domestic product growth was revised up to a 3.9% seasonally-adjusted annual rate from the last estimate of 3.7%. Consumers were strong, with final sales up at a 3.9% rate and residential fixed investment up at a 9.3% rate.
Following Fed chairman Janet Yellen’s speech after the close yesterday — in which she sounded a hawkish note justifying a rate hike before the end of the year — today’s speakers didn’t really say anything new. St. Louis Fed President James Bullard said he believed the Fed’s employment goal has already been hit, but admitted that it could be tough to hike rates at the October policy meeting due to the lack of new economic information between now and then.
This gives further support to the idea of a December rate liftoff.
Looking ahead, Monday will feature a number of key economic releases, including the August personal income and consumption data that could indicate building wage inflation pressure, something Fed policymakers are keen to see to justify higher interest rates. Tuesday will feature the September consumer confidence report.
And Friday, as the calendar turns to October, we’ll get the all-important monthly payroll report. Deutsche Bank is looking for a payroll gain of 200,000 and the unemployment rate holding steady at 5.1%. A strong report will bolster the odds of a Fed liftoff before year end — a possibility that’s been weighing on stocks for the last two weeks.
With higher rates on the horizon, market volatility remains elevated pushing up the CBOE Volatility Index. As a result, the VelocityShares 2x VIX (NASDAQ:TVIX) recommended to Edge subscribers this week is carrying a gain of nearly 6%.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
