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US stocks close mostly lower but lock in record gains of the week

Last updated: 08:46 28 Jan 2017 AEDT, First published: 20:08 27 Jan 2017 AEDT

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US stocks ended lower on Friday save for the Nasdaq which managed to scoop itself out of midsession losses.

British premier Theresa May became the first leader to meet Donald Trump as president on Friday. Trump and May said they reaffirmed their commitment to the Nato alliance, underscored the need for a strong trade relationship between the two countries and extended an invitation for Trump to reciprocate May’s visit later this year, which would mean a state visit.

But markets were not much focused on the meet and greet knowing that little concrete would derive from the meeting with May.

Although tickers were mostly lower on Friday, they still locked in a tremendous week which saw the Dow cross 20,000 for the first time and more record highs for other tickers too. All indexes closer higher than where they began the week – along with a new US President in situ.

The S&P 500 closed down 0.1% at 2294 and led by Robert Half International Inc (NYSE:RHI) down 7.3% to $46.30.

The Dow Jones Industrial Average closed down 0.04% at 20,093 while the Nasdaq came within 2 points range of matching the record high scaled on Thursday and closed up 0.1% at 5660.

The S&P Midcap 400 closed down 0.5% at 1696 and was led lower by TCF Financial Corp (NYSE:TCB) down 7.5% to $17.72.

The S&P Smallcap 600 closed down 0.4% at 838 and led by Super Micro Computer (NASDAQ:SMCI) down 6.5% to $26.70 after announcing its second quarter results overnight on Thursday.

The wider small-cap Russell 2000 finished down 0.4% at 1370 and led by Athersys Inc (NASDAQ:ATHX) down 26.3% at $1.12 after it announced the pricing of its underwritten public offering of 19,802,000 shares.

In Canada, the TSX Composite closed down 0.3% at 15,575.


Early trading

US stocks opened higher – but not enough to chalk new record highs – before sliding into negative territory on Friday as the weakest GDP figures in five years recoiled rate hike expectations for March.

Even a bullish US consumer sentiment survey out of Michigan failed to reverse the decline in tickers.

The University of Michigan’s consumer sentiment gauge rose to 98.5 in January, up from an earlier reading of 98.1, and higher than the 98.2 print in December. It was the highest for the gauge since 2004 – well before the financial crisis which later took hold.

The S&P 500 market bellwether was down 0.1% at 2293 and led by Robert Half International Inc (NYSE:RHI) down 8.1% at $45.87 after it reported weaker-than-expected fourth-quarter 2016 earnings, possibly due to currency headwinds.

The company’s fourth-quarter 2016 earnings of 61 cents per share missed the Zacks Consensus Estimate of 64 cents by 4.7%, and were within the guided range of 60–66 cents. Earnings declined 14.1% from the prior-year quarter adjusted earnings per share of 71 cents. This marked the second consecutive quarter of earnings decline in the last 26 quarters.

Earnings growth has been declining due to the company’s clients taking longer to make hiring decisions. Also, a tightening U.S. job market continued to put pressure on the labour supply, particularly at higher skill levels.

The Dow Jones Industrial Average was down 0.07% at 20,086. Although all three tickers were set for a possible assault on record levels on Friday, the most hope surrounded the tech-heavy Nasdaq Composite. Yet that too followed the pattern of failing to top Thursday’s record level – but just two points. It touched 5,667.45 and was last down 0.07% at 5651.

Fourth quarter GDP landed at 1.9% q/q and that is below an already conservative forecast of 2.2%. In the third quarter it had been 3.5%.

The S&P Midcap 400 was down 0.4% at 1697 and led by TCF Financial Corp (NYSE:TCB) down 6.8% at $17.86 after the bank holding company for TCF National Bank that provides various financial products and services in the U.S. and Canada was downgraded by Deutsche Bank from “buy” rating to a “hold” rating and cut the price target to $20 from $22.

The S&P Smallcap 600 was down 4.7% at 838 and led by Pioneer Energy Services Corp (NYSE:PES) down 5.5% to $6.05. Ironically, that came after Zacks Investment Research upgraded shares of Pioneer from a hold rating to a buy rating.. They currently have $7.50 target price on the stock.


Pre-Open

US stocks are poised to stretch to fresh record highs on Friday as futures contracts point north but the weakest economic growth numbers in five years may kill off a rally.

The Trump effect was starting to look more like Wall Street than Main Street after US GDP in the fourth quarter was recorded rising by 1.9% quarter-on-quarter, advance data showed. That’s below a 2.2% consensus forecast and down sharply from 3.5% in the third quarter. The data suggests the world’s biggest economy is cooling off and with it new US President Donald Trump’s honeymoon rally. But it could also make Trump keener to act protectionist with trade.

Trump may not be helped by a forecast today from PIMCO, the world’s biggest bonds investor. Donald Trump’s victory in the US election is likely to drive US interest rates up an extra 50 basis points beyond pre-election forecasts, according to PIMCO’s chief investment officer.

Federal Reserve chair Janet Yellen has already warned the US risks a “nasty surprise” if it waits too long to raise interest rates again, as President Trump’s promise to ramp up infrastructure spending have led many to predict an increase in inflation.

The Dow Jones Industrial Average and Nasdaq Composite both chalked record high closes on Thursday, while the S&P 500 did so intraday before sliding under the sheer weight of earnings reports.

On Friday, the Dow is expected to open up 0.02% and the Nasdaq up 0.2%. The S&P 500 is seen up 0.02%.

US President Donald Trump is hosting his first foreign leader Friday -- British Prime Minister Theresa May. They're expected to talk about improving their trading relationship, among other topics.

A press conference is scheduled for 1300 ET (1800 GMT). Currency traders will be among those watching closely -- the pound has fallen sharply against the dollar since the UK voted to leave the European Union, and it remains volatile, while the dollar gained from the pro-growth rhetoric of incoming Trump.

But experts expect the least progress to be made on trade, with no more than principles for trade being agreed. That’s because a deal with the UK will take years to conclude and meantime the UK’s Finance Minister Philip Hammond said in Brussels on Friday that Britain intends to fully respect its trading obligations to the EU while we remain a member.

In the meantime, Trump has been alienating other trading partners, in particular Mexico. His administration began outlining options yesterday for how to finance a border wall with Mexico with a 20% border tax being mulled. Mexican President Enrique Peña Nieto responded by canceling a meeting with Trump set for next week.

Starbucks (NASDAQ:SBUX) and Alphabet (NASDAQ:GOOGL) stocks were down after the companies released earnings on Thursday evening.

Google's parent company Alphabet reported it lost nearly $1.1bn from its moonshot projects in the fourth quarter of 2016. Starbucks was down 3.7% at $56.28 pre-market while Alphabet shares were down 0.3% at $854.27.

American Airlines (NASDAQ:AAL) became the latest of several US carriers to report a recovery in revenue in the fourth quarter of last year, but earnings fell year over year partly due to rising labour costs and tax charges.

Total revenue per available seat mile, a closely watched industry metric, rose 1.3 per cent for the quarter ended December 31, year on year, marking the first year on year increase since the fourth quarter of 2014, the airline said.

But the company reported net income sharply down at $289mln compared with $3.3bn in the year earlier quarter, when the company had recorded a large tax benefit.

AAL shares were up 2% at $50.59.

Colgate-Palmolive () NYSE:CL) shares declined in early trading after the consumer products company said fourth quarter sales missed estimates and cautioned that global uncertainty and currency issues remain a challenge next year.

The New York-based company behind Colgate toothpaste and Brite detergent said it swung to a profit of $606m or 68 cents a share in the three months ended in December, compared with a loss of $458m or 51 cents a share in the year ago period. Adjusting for one-time items, earnings of 75 cents a share were in line with estimates. Shares were down 5.3% at $64.65 pre-market.

Honeywell (NYSE:HON) shares slid in early trading after the US industrial conglomerate that is expected to see a change in leadership in March, said aerospace sales declined in the fourth quarter.

The New Jersey-based company, that has in recent years had to cope with soft global economic growth and the slump in crude prices, said earnings per share slid to $1.34 in the three months ended in December, from $1.53 a share in the same period a year ago. Adjusting for one-time items, the company reported earnings of $1.74 a share in line with estimates.

Honeywell shares were down 0.7% at $117.11.

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