Stocks Pull Back on Concerns Rally Was Overly Exuberant
Declines in financial shares help send U.S. stocks lower
By Riva Gold Updated Feb. 17, 2017 10:32 a.m. ET
Declines in financial shares helped pull U.S. stocks lower Friday, after hopes for a stronger economy sent major indexes to fresh records earlier this week.
The Dow Jones Industrial Average fell 45 points, or 0.2%, to 20575. The S&P 500 lost 0.2% and the Nasdaq Composite declined less than 0.1%.
Some investors said they were pausing to question the high expectations for growth and corporate earnings recently priced in equity markets. Earlier this week, the Dow Jones Industrial Average, S&P 500, Nasdaq Composite and Russell 2000 notched new records.
Traders work on the floor of the New York Stock Exchange on Monday. After its longest winning streak since 2013, the S&P 500 finally slipped Thursday.
Traders work on the floor of the New York Stock Exchange on Monday. After its longest winning streak since 2013, the S&P 500 finally slipped Thursday. Photo: Michael Nagle/Bloomberg News
U.S. shares have been boosted recently by signs of economic expansion, growth in corporate profits and the potential for tax cuts and deregulation. Major indexes remained on track to end the week higher despite Friday’s declines, with the Dow industrials and S&P 500 both on pace for weekly gains exceeding 1%.
“We see expensive valuations and slightly exuberant sentiment, which is making us take a little step back and sell some equities,” said Wouter Sturkenboom, multiasset investment strategist at Russell Investments, which managers $258.1 billion in assets.
Financial shares in the S&P 500 fell 0.7%. J.P. Morgan Chase & Co. lost 0.6% and Goldman Sachs Group declined 0.5%.
Shares of Kraft Heinz Company rose over 7% after the company said it has made a bid to merge with U.K. consumer products giant Unilever, whose London-listed shares jumped 13%.
The Stoxx Europe 600 fell 0.3%, with energy and bank shares among the biggest decliners, tracking losses in their U.S. counterparts on Thursday. U.S. crude oil was last down 0.7% at $53.36 barrel.
London’s export-heavy FTSE 100 index rose 0.2%, however, after disappointing U.K. retail sales precipitated a steep fall in the pound. Over 70% of the index’s revenue comes from outside the U.K., according to FactSet, helping it rise as the currency falls.
The British pound was last down 0.4% against the dollar at $1.2430, while the WSJ Dollar Index rose 0.1%.
As investors favored assets considered havens, German and U.S. government bonds strengthened modestly, sending their yields lower. 10-year U.S. Treasury yields fell to 2.414% from 2.450% while German bund yields fell to 0.312% from 0.347%.
Earlier, Japan’s Nikkei Stock Average ended down 0.6%, dragged lower by financial and auto stocks, to end the week down 0.7%. Shares of Toshiba Corp. also fell sharply amid continuing concerns about its financial health and the prospects of an effective removal from the Topix index.
Australia’s S&P/ASX 200 shed 0.2% Friday amid weakness in mining and health care stocks, to close he week up 1.5%. Hong Kong’s Hang Seng Index fell 0.3% and ended the week 1.9% higher.
Samsung Electronics shares fell 0.4% in South Korea on news that an arrest warrant was issued for Lee Jae-yong , the company’s vice chairman and de facto leader.
—Aaron Kuriloff and Ese Erheriene contributed to this article.
Write to Riva Gold at
riva.gold@wsj.com