U.S. equities drifted lower on Friday as investors looked back on the first week of the Trump Administration (High Energy!) and looked toward the week ahead, featuring a Federal Reserve policy decision, the January jobs report and a continuation of the fourth-quarter earnings reporting season.
In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost 0.1%, the Nasdaq Composite gained 0.1% and the Russell 2000 lost 0.4%. Treasury bonds were stronger, the dollar was stronger, gold lost 0.1%. and crude oil reversed some of its recent strength by falling 1.1%. The drop in oil boosted the ProShares UltraShort Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a 2.4% gain.
Healthcare stocks led the way with a 0.8% gain while energy was the laggard, down 0.9%. A number of retailers were hit as well, with Target Corporation (NYSE:TGT) losing its 200-week moving average for the first time since 2011, as Trump seemed to warm to the idea of a border tax that would increase the cost of goods sold.
Intel Corporation (NASDAQ:INTC) gained 1.1% after reporting a fourth-quarter earnings per share beat 4% ahead of estimates thanks to results from its cloud computing group. Microsoft Corporation (NASDAQ:MSFT) gained 2.4% after reporting a top-and-bottom line beat as analysts remain excited about the company’s cloud business. Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) fell 1.4% after missing on earnings.
On the downside, JetBlue Airways Corporation (NASDAQ:JBLU) fell 6.9% after suffering a downgrade from analysts at Argus citing valuation concerns after a rally over the last three months. Rising fuel costs and other expenses were noted as a concern.
Colgate-Palmolive Company (NYSE:CL) fell 5.2% after reporting a 4% revenue miss on slower-than-expected organic sales growth. And Starbucks (NASDAQ:SBUX) fell 4% after reporting a revenue miss with traffic down 2% in the United States.
On the economic front, GDP growth slowed to a 1.9% rate in the fourth quarter, down from the 3.5% rate seen in Q3 and the 2.2% growth that was expected by analysts. Personal consumption increased at a 2.5% rate, down from 3% in the previous quarter.
Looking ahead, investors have a lot to think about next week including a Federal Reserve policy announcement on Feb. 1. Fed Board Chair Janet Yellen and her cohorts have been sounding a hawkish note lately, leaning against the fiscal stimulus plans of the Trump White House as consumer price inflation rose above their 2% target last month (on fuel and housing costs).
As a reminder, the Fed has penciled in three quarter-point hikes for 2017 vs. just two quarter-point hikes since the tightening campaign started in December 2015.
After that, we’ve got the non-farm payroll report on Friday, Feb. 3. The unemployment rate has compressed in recent months, standing at 4.7% in January, as the job market tightens. Non-farm payrolls came in at 156,000 in January, continuing a steady if somewhat tepid pace.
Technically, investors should remain cautious as stocks continue to look dramatically overbought here and vulnerable to a profitmaking move to the downside. Sentiment is off the charts here, with the CBOE Volatility Index (INDEXCBOE:VIX) posting its second-lowest close in 11 years. Breadth continues to narrow.