Core consumer prices (excluding food and energy) rose 1.9% from a year earlier
Retail sales rose 0.4% in April, which was less than expected
Dow Jones off 18 at 20,901; S&P down 3.5 at 2,391
In for a Penney? Then you are in for a pounding
The Dow Jones index and the S&P 500 posted their first weekly loss in almost a month, but the Nasdaq Composite defied the trend.
The S&P 500 finished the day down 4 points at 2,301 while the Dow dipped 23 points to 20,897.
The Nasdaq Composit eked out a five point gain at 6,121.
In Canada, the S&P/TSX Composite ebbed 13 points to 15,538.
1.20... Retail stocks battered again
Not for the first time this week, the Nasdaq Composite is putting the other main indexes in the shade.
The tech-heavy index was up just over a point at 6,117 while the S&P 500 was down 6 points at 2,389 and the Dow Jones was off 37 points at 20,883.
J C Penney Company Inc (NYSE:JCP) continued this week’s other theme of retailers failing to meet low expectations.
After Macy’s, Dillard’s and Kohl’s all had terrible trading updated this week the market should have been braced for a shocker from J C Penney, but evidently was not.
READ JC Penney slides as sales miss again
Like-for-like sales in the three months to March dropped by 3.5% from a year earlier.
Also dragging down the benchmarks was industrial holding company General Electric Company (NYSE:GE), which shed 3.3% after Deutsche Bank downgraded the stock to ‘sell’.
10.20... Holders of retail stocks, look away now
As expected, stocks have started on the back foot following retail sales that were not as strong as hoped.
“On the face of it, today’s US data looks fairly disappointing. On inflation, headline CPI dipped back to 2.2% from 2.4%. Admittedly, one of the major drags in March, hotel prices, completely bounced back in April, but that wasn’t enough to offset a broader softening which nudged the core rate of inflation back below 2% to 1.9%,” commented James Smith, an economist at Dutch finance house ING.
“Likewise, both headline and core retail sales missed estimates (0.4% and 0.2% respectively), but strong backward revisions are enough to convince us that consumption is making a solid rebound after a brief slowdown in the first quarter,” he added.
“It’s hard to say whether that sluggishness was down to a fundamental blip (e.g. higher prices eating into budgets) or, more likely, due to inaccurate seasonal adjustment (‘residual seasonality’ in economist-speak). Either way, it’s fairly clear that the effect was ‘transitory’, and the backdrop of healthy consumer confidence and a robust jobs market will boost spending over coming months.
“This supports the Fed commentary over the past week, where a number of a speakers have reiterated their intention to hike twice more this year. A June hike is now looking more and more likely,” Smith opined.
With a June hike now looking probable, the main benchmarks opened in the red.
The Dow Jones average was down 18 at 20,901, while the S&P 500 was 3.5 points lower at 2,391.
Strangely,.given expectations of an interest rate increase, the greenback has come under selling pressure on the foreign exchange markets; higher interest rates usually suck money into a currency, but not on this occasion, apparently.
The buck’s weakness is good for gold, which was up 0.5% at US$1,230 an ounce.
Anglo-Swedish drugs giant AstraZeneca PLC (LON:AZN, NYSE:AZN) was the second best performing stock on the NYSE after revealing “positive results” for its Phase III PACIFIC trial of a lung cancer treatment.
READ AstraZeneca reports “highly encouraging” initial results from its PACIFIC lung cancer trial
The shares, up 8.7% in London, were 7.6% firmer in New York.
Top dog on the big board was Triton International Limited (NYSE:TRTN), up 7.7%.
The parent company of the parent of Triton Container International Limited and TAL International Group said market conditions have been favorable in 2017 for its dry container product line.
The company posted a net income o US$34.6mln for the first three months of 2017, equivalent to 47 cents a share. This represented a sharp improvement on a year earlier, when it reported net income of US$8.7mln, or 22 cents a share.
Market preview
Ahead of the open, traders were bracing themselves for a continuation of yesterday’s retreat.
The benchmark S&P 500 was tipped to open a point lower at 2,390 while the Dow Jones average was seen opening at around 20,887, down just over 20 points.
Traders were chewing over the April consumer price figures, which showed core consumer prices (excluding food and energy) rose 1.9% from a year earlier.
There was some relief for the beleaguered retail sector, which took a whacking yesterday, as retail sales rose 0.4% in April. Excluding vehicle sales and gas purchases, sales were up 0.3% in April and 3.7% year-on-year.
With equities out of favor, investors continue to turn to gold, though not with unfettered enthusiasm. The yellow metal was trading at US$1,227.40 an ounce, up 0.3%.