Stocks ended the trading week mixed on Friday, Aug. 25, after Federal Reserve Chair Janet Yellen said regulations put into action since the financial crisis have made the system "substantially safer" and boosted its resiliency.
The Dow Jones Industrial Average rose 0.16% by Friday's close to cap off a mixed week that saw the index reach its fifth-highest daily performance since the start of the year on Tuesday, Aug. 22. This is the first weekly gain for the index in three weeks.
The S&P 500 gained 0.18% by the end of trading Friday after it reached Tuesday highs that got it to its fourth-best day in 2017.
And the Nasdaq dropped by 0.09% after trading higher earlier in the session and spending most of the afternoon hovering around zero. The tech-heavy index continued a three-day losing streak. It hasn't set any records this month.
Central bankers convened in Jackson Hole, Wyoming, for the highly anticipated annual Economic Policy Symposium. The event runs until Saturday, Aug. 26, with speeches from Yellen and her European counterpart Mario Draghi, European Central Bank president, as highlights.
Draghi's appearance comes just two weeks before the ECB's meeting on Sept. 7, and Yellen more than three weeks from the Fed's next meeting on Sep. 19-20. Yellen spoke at the symposium Friday morning, ahead of Draghi, who took the stage at 3 p.m. ET.
Yellen made brief comments on strengthening employment figures in her speech Friday, but spent the majority of her talk addressing the efficacy of financial regulations.
Yellen said policy reform including stress tests for big banks and the creation of the Financial Stability Oversight Council has led to more credit available on good terms and an advance of lending in line with economic activity, contributing to today's "strong economy."
Yellen said there is "reason to hope" that the U.S. will experience fewer financial crises and recover more quickly should any crises occur, "sparing households and businesses some of the pain they endured during the crisis that struck a decade ago."
Because of policy reform, "Banks are safer. The risk of runs owing to maturity transformation is reduced. Efforts to enhance the resolvability of systemic firms have promoted market discipline and reduced the problem of too-big-to-fail. And a system is in place to more effectively monitor and address risks that arise outside the regulatory perimeter," Yellen said.
Dow component JPMorgan Chase & Co. (JPM) - Get Report traded up 0.4% following the release of Yellen's comments. Fellow Dow bank Goldman Sachs Group Inc. (GS) - Get Report closed the day slightly down to erase earlier gains.
Notably missing from Yellen's comments was an indication of the Fed's plans for interest rate increases or intentions to trim its $4.5 trillion balance sheet. Some analysts suggested that if Yellen made few remarks about the Fed's balance sheet or rate hikes the market's expectations were likely going to be confirmed. Investors will continue to comb through the speeches for any hawkish commentary.
Draghi's comments also lacked much insight into monetary policy. The ECB leader called instead for raising output growth by lifting productivity and working multi nationally to accomplish mutual trade goals. Most of Draghi's commentary focused on openness to trade and growth strategies undertaken as a global entity instead of hundreds of separate countries. "For advanced economies that are close to the technological frontier, [growth] depends crucially on openness to trade," Draghi noted.
He criticized leaders who threaten trade and offered support for "policies aimed at answering [backlash]," which are a "vital part of the policy mix for dynamic growth."
Investor sentiment was buoyed late in the week by comments from President Trump's economic adviser Gary Cohn on tax reform. In an interview with the Financial Times, Cohn suggested Trump is dedicated to passing tax reform by the end of the year. Trump's promise of tax cuts and fiscal stimulus have contributed to the record levels equities markets have reached since his election last fall.
Crude oil prices rose as Hurricane Harvey barreled toward the Texas coastline. The hurricane is expected to make landfall late Friday or early Saturday near Corpus Christi, Texas, and has maximum sustained wind speeds of 110 miles per hour. Forecasters have labeled category 3 Harvey a "life threatening" storm and predicted "catastrophic flooding" with as many as 30 inches of rain in some Texas cities along the Gulf coast. As of 12 p.m. ET, Harvey's outer bands started spreading tropical storm-like conditions to parts of the coastline ahead of making landfall.
West Texas Intermediate crude settled up 0.9%, or 44 cents, to $47.87 a barrel on Friday. Prices dropped 1.6% for the week.
The total active U.S. rig count declined by six to 940 rigs in the weekly Baker Hughes reading on drilling activity released Friday afternoon. The rig count declined by 3 to 946 last week. Overproduction and a supply glut have been problems in the U.S., though signs of falling output and stockpiles in recent weeks has stabilized prices.
On Thursday, Royal Dutch Shell PLC (RDS.A) shut down its Perdido floating oil platform in the Gulf of Mexico and Exxon Mobil Corp. (XOM) - Get Report reduced production flow to its Gulf platforms in preparation for Harvey. Anadarko Petroleum Corp. (APC) - Get Report has pulled some workers from its Gulf refineries, as well.
Airlines potentially affected by the hurricane include Southwest Airlines Co. (LUV) - Get Report , headquartered in Dallas, and American Airlines Group Inc. (AAL) - Get Report , which headquartered in Fort Worth.
Generator manufacturer Generac Holdings Inc (GNRC) - Get Report shares closed Friday up over 2.3% on speculation people would run out to buy generators. Home product retailers Home Depot Inc. (HD) - Get Report and Lowe's Cos. (LOW) - Get Report shares are also in focus. Lowe's has more than 140 stores in Texas, while Home Depot weighs in with nearly 180.
U.S. durable goods orders in the U.S. for July fell 6.8%, a wider-than-expected decrease compared to the 5.8% decline economists surveyed by FactSet anticipated. July's decrease reversed the 6.4% rise in durable goods orders in June.
Broadcom Ltd. (AVGO) - Get Report stock fell over 3.7% Friday after the company reported an earnings beat but cut full-year guidance. For the quarter, adjusted revenue of $4.47 billion was in line with consensus of $4.46 billion, while adjusted EPS of $4.10 topped the consensus of $4.03.
Analysts expected management would raise guidance based on increased revenue due to the company's chip production in the upcoming Apple Inc. (AAPL) - Get Report iPhone 8. But guidance was in line with consensus expectations. The company expects non-GAAP net revenue to fall around $4.8 billion next quarter.
How about that new Apple Watch.
GameStop Corp. (GME) - Get Report tumbled over 10% by Friday's closing bell after the retailer missed second quarter earnings estimates. The company reported adjusted EPS of 15 cents, missing the analyst expectation of 18 cents. Sales rose 7% to $188.3 million, but fell short of analysts' projected $207.6 million in sales.
Ulta Beauty Inc. (ULTA) - Get Report stock fell over 9% Friday despite beating Wall Street estimates in its second quarter financials released after the closing bell on Thursday. Ulta reported earnings of $1.83 per share, topping estimates of $1.78. But revenue of $1.29 billion just barely beat analysts' expectation of $1.28 billion, causing shares to tumble. Ulta joined Broadcom to weigh on the Nasdaq and erase its early Friday gains.
Chipotle Mexican Grill Inc. (CMG) - Get Report could face thinning margins and shave some off its per-share earnings in the near-term as avocado prices increase. According to Credit Suisse analyst Jason West, avocados are up 75% in price since July and jumped 50% year over year. Although that probably won't send Chipotle prices up, it could affect as much as 13% off EPS estimates for the third quarter and 20% in the fourth quarter. Chipotle stock finished up 2%.
More of What's Trending on TheStreet:
- 10 Mind-Blowing Things That Amazon Might Do to Whole Foods
- Apple's Newest Products That Will Pummel Your Wallet Are About to Be Revealed
- Amazon Is Secretly Becoming a Bank
- The 30 Nastiest Storms in Recent U.S. History Have Caused Mind-Blowing Damage