Stocks - Middle East Tensions Sink a Wall Street Rally

Investing.com – What started as a solid stock market rally Friday was mostly wiped out by rising tensions in the Persian Gulf.

The catalyst was a report that Iranian authorities had seized a British tanker passing through the narrow Strait of Hormuz, which connects the Persian Gulf to the Indian Ocean and is a critical passage for global oil supplies.

Crude oil prices surged in New York and London, creating worries enough to pull stocks back. West Texas Intermediate crude oil closed at $55.63, up 33 cents, but was trading higher still in the aftermarket.

The S&P 500 finished down 0.6%. The Nasdaq Composite slid 0.7%.

The Dow Industrials ended down 0.25%. But the performance was worse than it looks. A 4% gain in shares of Boeing (NYSE:BA) added nearly 110 points to the blue-chip average by itself. Investors applauded the aerospace giant's decision to take a $5 billion charge to account for costs from the grounding of its 737 Max airliner.

The major averages were down for the week after two weeks of gains. The second-quarter earnings season has started, but many reports failed to impress investors. Even Microsoft (NASDAQ:MSFT), which easily beat fiscal-fourth-quarter estimates and guided higher, struggled on the day.

Still, the S&P 500 is up 18.7% on the year. The Nasdaq has gained almost 22.8%. The Dow is up about 16.4%.

The Dow was up as many as 117 points early in the day, but gave up 186 points between that level and the close. Only eight of the Dow stocks were higher, with Boeing (NYSE:BA) the leader. Boeing was also the fifth-best performer among S&P 500 stocks.

Microsoft (NASDAQ:MSFT), McDonald’s (NYSE:MCD) and Visa (NYSE:V) hit 52-week highs. So, too, did Adobe Systems (NASDAQ:ADBE), Cintas (NASDAQ:CTAS), Costco Wholesale (NASDAQ:COST), Ross Stores (NASDAQ:ROST) and Starbucks (NASDAQ:SBUX).

Interest rates attracted some attention as President Donald Trump called on the Federal Reserve to cut its key rate at its July 30-31 meeting, arguing rates have held back the economy this year. The U.S. 10-Year yield was up slightly on the day to 2.051%. The yield is down 3.5% on the week and 23.8% this year, however.

Traders and investors are just about unanimous the Fed will cut its federal funds rate at this month's meeting. Investing.com's Fed Rate Monitor tool puts the odds at 100%, with a second rate cut coming at its Sept. 18 meeting.

Industrial, energy and materials stocks were the strongest sectors on Friday.

Real estate, utilities and communications services were the weakest sectors.

Next week will produce a flood of earnings reports that will be heavy on banks, but it will also include some of the biggest tech names: Facebook (NASDAQ:FB) on Wednesday and Amazon.com (NASDAQ:AMZN), Google parent Alphabet (NASDAQ:GOOGL) and Intel (NASDAQ:INTC) are all on Thursday.

Winners and Losers Among S&P 500 Stocks

State Street (NYSE:STT), Citizens Financial Group (NYSE:CFG and railroad operator Kansas City Southern (NYSE:KSU) were among the top S&P 500 performers.

Alliance Data Systems (NYSE:ADS), Gilead Sciences (NASDAQ:GILD) and Symantec (NASDAQ:SYMC) were among the worst performers.

Netflix (NASDAQ:NFLX) was the fifth-worst on the list after a weak earnings report on Wednesday caused investors to flee the stock. It fell 3.1% on the day and 15.6% for the week.

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