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Rally fizzles out; the Dow and S&P 500 post a loss for second week in a row

Last updated: 17:25 18 Aug 2017 EDT, First published: 12:25 18 Aug 2017 EDT

Chess piece - resignation
  • Dow Jones down 76 at 21,675

  • S&P 500 down 4.5 at 2,426

  • Stephen Bannon no longer strategic advisor to President Trump

It was an up and down day for blue-chips, with the major benchmarks ending the day in the red after a rally fizzled out.

The Dow Jones industrial average closed at 21,675, down 76 points, having risen as high as 21,793 at one point.

The broader-based S&P 500 fell 4.5 points to 2,425.6, well off its intra-day high of 4,240.

Both benchmarks logged the second weekly loss in succession.

Earlier in the day stocks had rallied on rumors that controversial figure Stephen Bannon had left the White House team, but the old adage of “buy on the rumor, sell on the fact” proved to be on the money as stocks slipped back once the news was confirmed.

Pundits suggested Bannon's exit made it less likely that President Trump's chief economic advisor, Gary Cohn, would jump ship.

Among the S&P 500's constituents, Ross Stores Inc (NASDAQ:ROST) were the best performers, followed by The Estée Lauder Companies (NYSE:EL).

Shares in cut-price clothing seller Ross Stores Inc (NASDAQ:ROST) were flying off the pegs in after-hours trading after the company's second quarter trading statement.

The shares finished almost 11% higher at US$59.02, after the company posted earnings per share of 82 cents, up 11 cents year-on-year and five cents better than the market had expected.

The Estée Lauder Companies group came up smelling of roses after it released its results for the fourth quarter of its fiscal year.

The company reported net sales of US$2.89bn, up 9% increase compared with US$2.65bn in the prior-year period.

The shares scrubbed up well, rising 7.7% to US$105.92

READ Estée Lauder zips higher as quarterly results and full-year profit guidance top estimates

 

Mid-session: Stocks rally on rumors of exit of controversial aide to President Trump

US stocks have rallied, moving into positive territory on reports that President Trump is giving his chief strategist, Steve Bannon, his marching orders.

The Dow Jones was up 20 points at 21,770 in lunchtime trade while the broader-based S&P 500 was 6 points higher at 2,436.

The New York Times reports that Bannon pre-empted his ousting by handing in his resignation back on 7 August.

Meanwhile, stocks received a minor lift from the Reuters/University of Michigan sentiment index, which jumped 4.2 (4.5%) to 97.6, which was well ahead of the expected number of 94.0.

“While the latest result was encouraging, we view it with some skepticism. Turmoil surrounding the Trump administration has dominated the news in the past few days, and it has introduced a dose of volatility into the markets. We suspect that recent events may negatively influence the attitudes of consumers in coming weeks,” said Daiwa Securities.

Outdoor sporting goods retailer Sportsman's Warehouse Holdings Inc (NASDAQ:SPWH) shot up 31% to US$4.52 after its second quarter earnings hit the spot.

Net sales in the 13 weeks to 29 July increased by 0.9% to US$191.5mln from US$189.8mln in the same period of 2016.

Like-for-like sales decreased by 9.0% over the same period, however.

Another sportswear-orientated retailer, Foot Locker Inc (NYSE:FL) dragged its peers lower after its second quarter earnings per share of 62 US cents were well short of the 90 US cents analysts had expected.

Revenue of US$1.70bn was US$100mln short of analysts' expectations.

Open: Stocks open lower in wake of terrirorist attacks in Spain

US markets opened lower, adding to yesterday's losses.

Political uncertainty has been a theme of the markets this month, and to the simmering tensions between North Korea and the US we must now add further terrorist attacks in Spain.

The Dow was down 49 points at 21,702 after half an hour of trading while the more broadly based S&P 500 was down 4 at 2,426.

"We’re seeing risk aversion in the markets again on Friday, with the possibility of a self-inflicted crisis within Donald Trump’s White House and another terror attack, this time in Barcelona, weighing on risk appetite," said Craig Erlam at forex trading platform operator Oanda.

"Trump has been no stranger to controversy in his short time as President but the latest entirely unnecessary and avoidable situation could prove quite costly for him. Trump has already this week been forced to dissolve his manufacturing council and the strategic and policy forum, while his infrastructure council never even got off the ground, after numerous CEO’s withdrew from the initiatives due to his response to the white supremacy rally in Charlottesville, Virginia, last weekend.

"The next casualty could be the most costly of the lot, with speculation growing that Gary Cohn – a key figurehead in Trump’s tax reform and spending initiatives – could resign from his position as National Economic Council Director. This would be a bitter blow for Trump and be the icing on the cake of what has been a dreadful week for the President. The negativity is flowing through to the markets as well as such a move would cast doubt over whether Trump will deliver on his tax reform and spending promises in the foreseeable future, two things that have been at least partly responsible for the post-election rally in the markets," he added.

Tenet Healthcare Corp (NYSE:THC) defied the trend, rising 10% to US$13.91 after Randy Simpson and Matt Ripperger, representatives of major shareholder Glenview Capital Management, resigned from the Tenet board.

The directors cited “irreconcilable differences” in their resignation letter.

Also on the up was Calpine Corporation (NYSE:CPN), a generator that uses natural gas and geothermal resources, after it agreed to a private equity buy-out.

The shares rose US$1.275 to US$14.775 after a consortium led by Access Industries and the Canada Pension Plan Investment Board offered US$15.25 a share, valuing the company at US$5.6bn.

Around the markets

  • Dollar index: 86.14, down 0.27%
  • Gold: US$1,302.00 an ounce, up US$9.60
  • WTI crude: US$46.94 a barrel, down 15 cents

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