U.S. equities ended the week on a low note after China reported its slowest quarterly GDP growth in nearly 30 years and two of the biggest U.S. companies – Boeing and Johnson & Johnson – were rocked by negative headlines. The Dow dropped over 255 points to close at nearly 26817 and the Nasdaq declined over 67 points to end at just over 8089. However, despite its nearly 12-point decline to 2986 on Friday, the S&P 500 did manage to log another weekly gain. Key U.S. Treasury yields fell, with the two-year easing 4bps to 1.57% and the 10-year declining 1bp to 1.75%.
With just over 14.5% of S&P 500 companies reporting third-quarter results, 83.6% have exceeded earnings per share (EPS) expectations, while 61.6% have beaten revenue expectations. As of October 18, 2019, Refinitive estimated the S&P 500 index’s third-quarter earnings growth rate at -3.1% and its 12-month forward P/E ratio at 17.2. JPMorgan, Coca-Cola, and UnitedHealth impressed, while Netflix, IBM and Gildan Activewear disappointed.
Chinese Q3 GDP growth slowed to 6.0% year-over-year, down from 6.2% in Q2 and below consensus 6.1%. The Q3 reading was the weakest in at least 27 years. China’s GDP grew 6.2% year-to-date, putting it at the lower end of the government’s 6.0- 6.5% 2019 target.
Boeing shares fell nearly 7% on Friday on headlines that the aircraft maker unintentionally misled regulators about a key safety system in the 737 Max. Meanwhile, Johnson & Johnson shares declined over 6% after the company announced a baby powder recall due to tests showing small amounts of chrysotile asbestos.
September’s surprise -0.3% retail sales read missed the 0.3% estimate and as was down from August’s 0.4% print, logging the first decline in seven months. Core retail sales’ 0% read also surprised to the downside and missed its 0.3% estimate, also down 0.4% from August.
September housing starts of 1.265 million was below the consensus estimate of 1.306 million and August’s 1.386 million pace. The August read was down 9.4% year-over-year. Elsewhere, September industrial production was down 0.4% for the month, above 0.2% consensus decline.