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Market Snapshot: U.S. stocks jump, even as retail sales data comes in weaker than expected

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U.S. stocks were up around midday Friday as investors took a weaker-than-expected reading of April retail sales in stride, shaking off a tumultuous week that has been marked by growing inflation fears.

Friday’s climb helps to pare steep weekly drops for the Dow and the S&P 500 index, after reports on inflation, labor shortages and higher commodity prices raised concerns that the Federal Reserve would have to pull back on its easy-money policies sooner than expected.

What are major benchmarks doing?
  • The Dow Jones Industrial Average
    DJIA,
    +1.03%

    jumped about 305 points, or 0.9%, to about 34,326.
  • The S&P 500
    SPX,
    +1.45%

    gained about 56 points, or 1.4%, to trade near 4,168.
  • The Nasdaq Composite Index
    COMP,
    +2.10%

    climbed about 266 points, or 2%, to near 13,391.

On Thursday, the Dow finished with a gain of 433.79 points, or 1.3%, as stocks took back a chunk of the previous session’s rout and ended a three-day losing streak. The Nasdaq Composite rose 0.7%, while the S&P 500 advanced 1.2%. Major benchmarks remain on track for sizable weekly declines, with the Dow down 2.2% through Thursday, the S&P 500 off 2.8% and the Nasdaq down 4.6%.

What’s driving the market?

Investors may be viewing the past few sessions as a buying opportunity, despite a batch of economic reports that have illustrated the challenge of recovering from the COVID-19 pandemic.

Savings levels are higher and “people have a hard time sitting on their hands” when they see buying opportunities after a dip, Chris Shea, chief investment officer at WealthSource, said in a phone interview Friday. “There’s a lot of refueling of the economy that is still to come.”

Early Friday, data showed sales at U.S. retailers were unchanged April after a blockbuster 9.8% gain in the prior month when the government sent out $1,400 stimulus checks to most Americans.

Economists polled by Dow Jones and The Wall Street Journal had forecast an 0.8% increase. Excluding autos and gas sales, retail sales dropped 0.8% last month. That measure of retail sales was up 8.4% in March.

Some analysts took the reading in stride.

“A flat retail sales read is actually par for the course in a normalized environment so in a way this actually shows that retail is somewhat stabilizing,” wrote Mike Loewengart, managing director, investment strategy at E-Trade Financial, in an emailed note.

“So while on its own this read is not likely to move the needle in either direction, it probably supports the point of view that the dip we experienced this week is a buying opportunity as all sectors march toward full recovery,” he wrote.

Earlier this week Inflation worries moved front and center for equities and other markets, reinforced by a hotter-than-expected reading on the April consumer-price index on Wednesday. Technology and other interest rate sensitive growth stocks have suffered the most as Treasury yields rose in response.

WealthSource, which manages about $1.7 billion in assets, has a “modest overweight” to growth stocks, according to Shea, who is based in Greenwich, Connecticut. “We’re not sheltering in place,” he said. “I’m generally bullish.”

“Higher inflation is likely to remain in the spotlight as the post-pandemic recovery accelerates,” said Mark Haefele, chief investment officer at UBS Global Wealth Management, in a note. “But while we expect inflation fears to generate bouts of volatility, and we continue to position for reflation, we also see such market swings as an opportunity to build exposure to structural winners.”

Equities bounced on Thursday, after a three day slide, led by sectors more sensitive to the economic cycle, buoyed by optimism over the economic reopening after weekly data showed a further drop in first-time jobless claims and the Centers for Disease Control and Prevention eased mask-wearing guidance for fully vaccinated people. The new guidance is seen clearing the way for fuller reopening of schools and workplaces.

In other data on Friday, an April import-price index showed a 10.6% rise in past year, a 10-year high. U.S. import prices rise 0.7% in April, also up 0.7% minus fuel.

U.S. manufacturing output rose 0.7% in April , the Federal Reserve said Friday. Economists polled by the Wall Street Journal had forecast industrial output rising 0.8% in April. Production rose a revised 2.4% in March, up from the initial estimate of a 1.4% gain.

U.S. consumer sentiment slumped unexpectedly this month, MarketWatch reported Friday. The University of Michigan’s index of consumer sentiment fell to 82.8 in May for the lowest reading since February. The index had hit a pandemic high in April.

Which companies are in focus?
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y fell 1.3 basis points to 1.648%. Yields and bond prices move in opposite directions.
  • The ICE U.S. Dollar Index DXY, a measure of the U.S. currency against a basket of six major rivals, was down 0.5%.
  • Oil futures traded sharply higher, with the U.S. benchmark CL00 adding 2% at $65.12 a barrel on the New York Mercantile Exchange. Gold futures
    GC00,
    +0.79%

    traded higher on the back of subdued yields and a weaker dollar, up 0.8% at $1,838.90 an ounce.
  • European equities climbed, with the Stoxx 600 SXXP closing 1.2% higher and London’s FTSE 100 UKX, rising 1.2%.
  • In Asia, Hong Kong’s Hang Seng Index HSI advanced 1.1%, the Shanghai Composite SHCOMP gained 1.8% and Japan’s Nikkei 225 NIKclosed 2.3%.

William Watts contributed reporting

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