All major averages finished the week higher with the Dow Jones Industrial Average rising to a record close.
The Dow climbed 74 points, or 0.2%, to 35,677.08, its first record close since August 16. The S&P 500 edged lower by 0.02% to 4,544.90 a day after the benchmark closed at a record. The Nasdaq Composite shed 0.8% to 15,090.20.
Shares of Intel retreated more than 11% following a weaker-than-expected sales report. The semiconductor company blamed an industry-wide chip shortage for its revenue miss.
Social media stocks also dropped after Snap said its advertising business declined due to Apple’s privacy changes. Snap shares sunk more than 25%. Facebook and Twitter pulled back 6% and 4%, respectively.
However, several tech stocks rose to all-time highs. Tesla shares extended their rally, rising 1% after hitting a new intraday high earlier in the morning. The stock closed 3% higher Thursday after posting record profit and revenue, along with strong margins. Netflix, Ebay and Microsoft also climbed to new all-time highs.
Despite the blips in the tech sector, overall earnings season has been terrific so far, boosting the broader market back to an all-time high following a two-month lull. So far for the third quarter earnings season, 84% of the 117 companies that have reported have beat analysts’ earnings estimates, according to Refinitiv. Profits are on pace in the quarter to increase 34.8%, according to Refinitiv.
Still, things may still seem a little uncertain for investors looking toward the end of the year due to cost pressures, labor shortages and commentary from company management on earnings calls and comments from Fed chair Jerome Powell and other policymakers — even with the S&P 500 up 20% for the year, Stephen Kolano, chief investment officer of BNY Mellon Investor Solutions, told CNBC.
“You’re starting to see some profit taking as a result of that,” Kolano said. “Where investors are going first and foremost is the companies that have run the fastest, which is a lot of the tech.”
And as they rotate out of tech, they’re rotating into financials and commodity-sensitive stocks as a way to reposition going into the fourth quarter and eventually into the new year, he added. These are sectors that offer not only better valuations but could also feel less impact from cost pressures and play well into a rising rate environment, he explained.
The disappointing results from Intel and, earlier this week, IBM, as well as hawkish comments from Federal Reserve chair Jerome Powell on inflation and policy tightening Thursday have added to market jitters, but the slight move downward shouldn’t be too worrisome, at least in the near term, said Cliff Hodge, Cornerstone Wealth’s chief investment officer.
“After a 5% rally on seven green days in a row for the S&P it makes some sense for the market to consolidate,” he said. “The setup into year-end looks great given the liquidity dynamics on corporate buybacks, but longer term there are still the unresolved headwinds of valuation, the transition to mid-cycle in the economy, and a tightening Fed that may prove challenging now that we’re back at all-time highs.”
All three major averages are on track to close the week higher for three straight weeks of gains. The S&P 500 hit both a fresh intraday high and new record close Thursday. The Dow touched an intraday record earlier in the week. On the month, the S&P and Dow are up 5% while the Nasdaq is up 4%.
“In a quarter where we thought things would slow down and there was concern about what profit margins were going to look like, these companies are still doing well,” said Victoria Fernandez, chief market strategist at Crossmark Global Investments.
Strong jobs data also added to the positive market sentiment on Thursday. Initial jobless claims fell to a new pandemic low of 290,000 last week, the Labor Department reported Thursday — down 6,000 from the previous week and lower than the 300,000 expected from economists surveyed by Dow Jones.
One of investors’ fears during the market’s recent struggles was a China property crisis. However, investors got good news on that front overnight with China’s Evergrande reportedly paying a key interest payment that was due to foreign bondholders, staving off a default for the property developer.