Stocks opened comfortably higher Friday, but lost steam as the session wore on. Amid an empty economic calendar, attention was focused on the latest batch of earnings reports and a continued win streak for the Dow Jones Industrial Average.
American Express (AXP) was one of the most notable earnings movers today, with the Dow stock slumping 3.9% after its Q2 results. Drilling down on the numbers, the credit card company reported higher-than-expected earnings of $2.89 per share, though revenue of $15.1 billion fell short of estimates.
Particularly noteworthy were comments from American Express CEO Steve Squeri, who said in the company's earnings call that "cardmembers' spending hit another all-time high in the quarter." Translation: The consumer remains resilient even as the Federal Reserve tries to bring down inflation by slowing the economy.
CSX (CSX) was another post-earning decliner, with the industrial stock falling 3.7% after its quarterly report. The railroad operator said both earnings and revenue were down on a year-over-year basis in its second quarter, though the 49 cents per share and $3.7 billion it reported matched analysts' estimates.
Tech stocks decline ahead of Nasdaq-100 rebalancing
Meanwhile, several tech stocks including Apple (AAPL, -0.6%) and Nvidia (NVDA, -2.7%) declined ahead of Monday's major rebalancing of the Nasdaq-100 Index. The Nasdaq offshoot tracks 100 of the largest and most actively traded non-financial stocks listed on the Nasdaq stock exchange. This year's mega-cap tech rally has resulted in oversized weightings in a handful of stocks, and the rebalancing is needed to bring them back in line with the index's methodology.
A special Nasdaq-100 rebalancing is rare and last occurred in 2011, says David Kostin, chief economist at Goldman Sachs. Apple and Microsoft (MSFT, -0.9%) will have the biggest reductions in weightings, Kostin adds, while semiconductor stock Broadcom (AVGO, +1.0%) will see the largest increase.
At the close, the Dow was up marginally at 35,227, eking out a 10th straight win. The S&P 500 also finished with a fractional gain at 4,536, while the Nasdaq Composite slipped 0.2% to 14,032.
Big Tech earnings, Fed meeting on deck
So what's in store for next week? It will be a busy one, that's for sure. A jam-packed earnings calendar will certainly keep investors on their toes, particularly as Big Tech results start to roll in. Among the many notable names set to report is Microsoft, which has been one of the best AI stocks so far this year.
Additionally, the next Fed meeting will kick off Tuesday, with the central bank's monetary policy announcement due out Wednesday afternoon. Futures traders are pricing in a 99.8% chance the Fed will hike interest rates by a quarter-percentage point next week, according to CME Group, so all eyes will be looking for hints as to whether this will be the end of rate hikes – or if another is expected later this year.
In his press conference, which will occur after the policy statement, Fed Chair Jerome Powell "is likely to emphasize that further evidence is needed to have confidence inflation will be tamed," and that more tightening is needed, says Matthew Luzzetti, chief economist at Deutsche Bank. However, with the July and August consumer price index (CPI) and jobs reports due out between now and the September Fed meeting, Powell is unlikely to give strong guidance on the potential for more rate hikes. "Data dependency will remain a key theme for the Chair," Luzzetti says.
