U.S. stocks fell Friday as investors considered mixed company earnings and new reports of sluggish growth in the Chinese economy.
Treasury yields declined across the curve amid speeches from three Federal Reserve officials Friday in their final public remarks before officials enter a quiet period prior to central bank’s Oct. 29-30 meeting. During a speech in Boston, Fed Vice Chair Richard Clarida reiterated that monetary policy is not “on a preset course,” and that officials would review the economic outlook in making its rate decisions. He characterized the U.S. economy Friday as being “in a good place.”
Here’s how the markets settled at the end of regular trading Friday:
S&P 500 (^GSPC): -0.39%, or 11.75 points
Dow (^DJI): -0.95%, or 255.68 points
Nasdaq (^IXIC): -0.83%, or 67.31 points
10-year Treasury yield (^TNX): -0.7 bps to 1.747%
Gold (GC=F): -0.26% to $1,494.40 per ounce
Shares of Boeing (BA), a Dow component, slid nearly 7% Friday after a Reuters report suggested the aircraft-maker misled the Federal Aviation Administration about the 737 Max’s safety system. The report cited instant messages between employees from 2016 obtained by Reuters.
The Dow fell nearly 200 points amid declines in Boeing’s stock, compounded by a slide in shares of Johnson & Johnson (JNJ) after some bottles of its baby powder were found to contain small amounts of asbestos.
Meanwhile, another Dow component Coca-Cola (KO) posted stronger-than-expected sales for its fiscal third quarter, sending shares higher even as comparable earnings per share fell short of expectations. The beverage giant’s closely watched organic revenue, which removes variables like currency effects, grew 5%, versus a 4.1% gain expected by analysts, according to consensus analysts. Coca-Cola underscored double-digit volume growth in Coca-Cola Zero Sugar as a key factor in helping drive results, reflecting the company’s recent shift to meet consumers’ demands for less sugary, health-conscious drinks.
Coca-Cola updated its full-year guidance to see at least 5% growth in organic revenues for the full fiscal year, leaving the door open for growth beyond the straight 5% increase it had anticipated earlier. The company reiterated guidance for full-year earnings per share (EPS) to decline or rise by 1% relative to the $2.08 in comparable EPS posted last year.
Overseas, other corporate earnings were mixed. Swedish automaker Volvo (VOLV-B.ST) reported a 45% decline in third-quarter orders for heavy trucks and said it expects these drops to extend into next year.
“During the last couple of years, customers in Europe and North America have renewed and expanded their truck fleets, but with freight volumes having leveled off and with the current uncertainty about the future economic development they are now holding back on investments,” Volvo said in its earnings report.
Despite suggestions at weakening demand for its automobiles, Volvo’s shares reversed initial losses and rose on the Stockholm Stock Exchange, as investors considered the company’s stronger-than-expected adjusted operating profit and margin for the quarter, and CEO Martin Lundstedt’s later commentary laying out a roadmap to weather tepid demand.
French auto group Renault also underlined a slowdown in the global auto industry with a gloomy earnings pre-announcement, sending its shares lower by more than 12% on the Euronext Paris.
Renault downwardly revised its expected group revenues to see drop of between 3-4% for the year, versus previous guidance for little change compared to 2018. It also narrowed operating margin guidance to 5%, versus the 6% seen previously. The carmaker cited “an economic environment less favorable than expected and in a regulatory context requiring ever-increasing costs.”
China’s growth slumps to a near 30-year low
Growth in the world’s second-largest economy was even more anemic than expected in the third-quarter, as trade tensions and a continued slowdown in investment outweighed Beijing’s recent stimulus measures.
China’s gross domestic product grew just 6% in the three months ended in September, the slowest pace since 1992. This was lower than consensus expectations for growth of 6.1%.
However, other areas of the Chinese economy showed signs of picking up in September. Industrial production grew 5.8% in September over last year, better than the 4.9% consensus. And retail sales rose 8.2% for the year-to-date through September in the country, topping expectations by 10 basis points.
Meanwhile, in the U.S., the Conference Board’s Leading Index, a gauge of the health in the domestic economy, fell for a second consecutive month in September. This index declined 0.1% after a downwardly revised 0.2% decrease in August. This was below consensus expectations for a flat reading for the month, according to Bloomberg data.
“The U.S. LEI [Leading Economic Index] declined in September because of weaknesses in the manufacturing sector and the interest rate spread which were only partially offset by rising stock prices and a positive contribution from the Leading Credit Index,” Ataman Ozyildirim, senior director of economic research at The Conference Board, said in a statement. “The LEI reflects uncertainty in the outlook and falling business expectations, brought on by the downturn in the industrial sector and trade disputes.”
“Looking ahead, the LEI is consistent with an economy that is still growing, albeit more slowly, through the end of the year and into 2020,” Ozyildirim added.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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