U.S. stocks pulled back Friday after the S&P 500 touched a new record intraday high earlier in the session. Treasury yields stabilized, and energy prices soared amid geopolitical angst.
The S&P 500 (^GSPC) edged down 0.12%, or 3.63 points, as of market close, paring gains after hitting a new all-time intraday high of 2,964.14 points. The Dow (^DJI) declined 0.13%, or 33.91 points, while the Nasdaq (^IXIC) slipped 0.24%, or 19.63 points.
Equities were on a tear this week amid signals of looser monetary policy from the U.S. Federal Reserve, Bank of England and Bank of Japan. The S&P 500 rose 2% over the course of the past week, and posted its best start to June on record, up 7.2% for the month through Friday’s close.
The Dow rose 2.4% for the week. The 30-component index, up 7.67% for the month, has posted its best start to June since 1938.
Treasury yields edged up Friday, recovering slightly as a buying spree from traders earlier in the week cooled. The 10-year yield (^TNX) rose 5.8 basis points to 2.059%, after breaking below 2% for the first time since November 2016 on Thursday. Yields move inversely to prices.
Friday marked the last session of trading before S&P Dow Jones Indices implements its quarterly rebalance of the S&P 500. This involves an adjustment to the representation of the 500 companies that comprise the S&P 500, and will impact exchange-traded funds (ETFs) and other funds tracking the index. Index adjustments tend to drive higher trading volumes as portfolio managers shift their holdings to align with the rebalanced index. The rebalance takes effect at market open June 24.
Additionally, Friday saw the simultaneous expiration of contracts on stock-index futures and options, stock options and single stock futures. This quarterly event – also called “quadruple witching” – also tends to stir up higher trading volumes and volatility.
Meanwhile, gasoline futures (RB=F) surged 4% after explosions and major fires broke out at Pennsylvania’s largest oil refinery. The fire, which originated from a vat of butane at Philadelphia Energy Solutions, was contained but not under control as of Friday morning, according to multiple reports.
Crude oil prices also continued to climb Friday amid escalating tensions between the U.S. and Iran. President Donald Trump ordered military strikes on Iran before reneging, according to the New York Times, after Tehran downed a U.S. drone on Thursday.
Friday morning, Trump wrote in a series of Twitter posts that he stopped the strike just before it was set to initiate, and that he was “in no hurry” to escalate tensions with Iran.
Futures for domestic crude oil (CL=F) rose 0.6% to $57.43 per barrel Friday, adding to gains of more than 5% during Thursday’s session. Brent crude oil prices (BZ=F), the international benchmark, rose more than 1% to $65.20 per barrel.
A measure of business growth in the U.S. dropped to the lowest level in more than three years as activity in both the manufacturing and services sectors softened. IHS Markit’s U.S. manufacturing purchasing managers’ index (PMI) fell to 50.1 in its flash June reading, a near 10-year low. This was below May’s reading of 50.5, and consensus expectations for the reading to remain unchanged from May to June.
Meanwhile, IHS Markit’s services PMI declined to 50.7 in June, falling from 50.9 in May and underperforming against consensus expectations. The June services activity PMI was the lowest reading in 40 months. In total, the U.S. composite PMI registered at 50.6, the lowest level in nearly three-and-a-half years. Readings above a neutral level of 50 indicate expansion.
The world’s largest cannabis company reported quarterly losses before interest, taxes, depreciation and amortization of C$98 million (or about $74 million), versus a loss of $64 million expected, according to Bloomberg data. Adjusted gross margin – a closely watched metric as investors eye signs of profitability for members of the nascent industry – contracted to 16% for the quarter ended March 31. This was below consensus expectations for 24%. On the top line, revenue of C$94 million beat expectations for C$92 million.
Red Hat (RHT), an open-source enterprise software provider, reported first-quarter results that came in well above consensus expectations. Adjusted earnings per share of $1.00 bested consensus estimates by 14 cents, while revenue of $934.1 million was slightly above expectations. Subscription revenue grew to $815 million, up 15% over last year. IBM (IBM) is set to acquire Red Hat in a $34 billion deal, the two companies announced in October.
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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