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XAutoplay: On | OffU.S. stock indexes reversed lower at midday Friday, erasing early gains as the chip sector came under fire.
The Nasdaq was down 0.6% after being up 0.3%, while S&P 500 dog-paddled to a 0.2% gain. The blue chip Dow Jones industrial average was up 0.3% and the small-cap Russell 2000 led with a 1.1% pop. Volume in the stock market today was down on the NYSE and up on the Nasdaq.
Britain’s Conservative Party unexpectedly lost its majority in Parliament, which could complicate talks on Britain’s exit from the European Union. This came a day after former FBI chief James Comey ripped President Trump, but the testimony seemed more about honesty than illegality. The stock market gauged both pieces of news and tossed them into the so-what file.
Late Thursday, the U.S. House of Representatives passed legislation hollowing out much of Dodd-Frank, a move that could make banks more profitable, especially small banks. But that legislation faces a tougher test in the Senate.
Friday’s market was building on the previous session’s strength in the bank and financial sectors. Those two sectors have been laggards in recent months. Chips did well Thursday, but an early rally Friday fizzled.
The Philadelphia semiconductor index, known as the SOX, climbed 1.8% Thursday and added 0.9% early Friday before tumbling 1.9% in midday trade. The sector slid as top chip company Nvidia (NVDA) made a bearish reversal after short seller Citron Research said the stock will fall to 130.
The Powershares KBW Bank (KBWB) exchange-traded fund hustled 1.7% higher Thursday as it retook its 50-day line. Midday Friday the bank ETF was up 2%. The ETF is working on a 12% deep flat base, but the pattern looks somewhat like a double-bottom base. A fair number of bank stocks are showing similar action.
Citigroup (C) broke out of a flat base Thursday with a 2% gain and added another 2% midday Friday. The stock remains in its 5% buy zone. Citigroup reported Q1 results in April, growing earnings 23%, the best in five quarters and almost 10% above the Street’s estimate.
Four stocks in the 30-stock Dow Jones industrial average notched gains of 1% or more. They were Caterpillar (CAT), which is extended from an April breakout; Goldman Sachs (GS) and JPMorgan Chase (JPM), which are both trying to retake declining 50-day lines; and Pfizer (PFE), which is attempting to halt a 9% decline that began in early March.
Among IBD’s 197 industry groups, banks and financials claimed 10 of the day’s top 20 up moves. Construction and machinery stocks grabbed two of the remaining positions. On the negative side, gold miners took the hardest hit.
Economic news was thin Friday. The market is waiting for the 1 p.m. ET release of the Baker-Hughes weekly rig count.
In the coming week, the Federal Reserve will meet Tuesday and Wednesday. The CME Group FedWatch Tool pegs the likelihood of an interest rate hike to the 1% to 1.25% range at 99.6%. The remaining 0.4% see a bigger increase to the 1.25% to 1.50% range. The expected rate hike could be another item behind the recent strength in bank stocks.