Market Snapshot: Energy shares drag down U.S. stocks

Earnings from energy giants Exxon Mobil and Chevron disappoint investors.

Drops in earnings for energy giants Exxon Mobil and Chevron prompted investors to dump energy stocks in droves Friday, which eventually weighed on all main equity benchmarks.

The S&P 500 SPX, -0.23%  closed 4.71 points, or 0.2%, lower at 2,103.90, with the energy sector accounting for most of the losses. The sector fell 2.6% and is now down nearly 28% over the past 12 months.

The benchmark index ended July roughly at the same level it finished in May, erasing all of the previous month’s losses. The weekly gain for the benchmark stood at 1.2%, while it booked a 2% gain over the month.

The Dow Jones Industrial Average DJIA, -0.32%  slipped 55.32 points, or 0.3%, to 17,690.66, but ended the week with a gains of 0.7% and booked a 0.4% gain over the month. The Nasdaq Composite COMP, -0.01%  ended the session less than a point lower at 5,218.28. The tech-heavy index rose 0.8% over the week and 2.9% over the month.

Investors also were debating whether data showing weak wage growth could prompt the Federal Reserve to think twice about raising interest rates in September. Analysts pointed out that weak wage growth is a symptom of slowing economic growth.

“While weak data suggest the Fed might be patient with rate hikes, the other side of this story is that the economy is not growing as fast as we would hope,” said Quincy Krosby, market strategist at Prudential Financial.

“For prices to go higher, the economy needs to accelerate, while earnings growth needs to pick up,” Krosby said.

Another focus of investors is second-quarter earnings. Reports so far this season have on the whole beaten estimates, but revenue and earnings growth have nonetheless been weak.

“The last data I saw from FactSet showed that 75% of S&P 500 companies that have reported have topped estimates, better than the 63% historical average, but earnings for the first half of the year are still on pace to actually contract by 0.7%, which would be the first year-over-year decline in the first half of a year since 2009,” wrote Andrew Adams, chief market technician at Raymond James.

“As a result, we have not seen the market pop [as] typically expected whenever such a large percentage of companies is topping estimates, and with stocks peaking the past two days at the 2110 level, it appears that level is the first hurdle to overcome before the prior high can be threatened,” Adams wrote.

Economic reports: The wages and benefits that companies, governments and nonprofit institutions pay their employees rose a record-low 0.2% in the second quarter, according to the employment cost index released by the Labor Department on Friday. That was well below the 0.7% gain in the first quarter and came as a surprise to economists surveyed by MarketWatch, who had expected a 0.6% gain.

“Wage costs data are very important for the Federal Reserve, as they would really like to see inflation to start going higher. But deceleration in wage growth suggests otherwise. At this point, nobody is sure what to do about the rates, neither the Fed nor the market,” Krosby said.

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