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Market Snapshot: Dow jumps over 250 points, even as retail sales data comes in weaker than expected

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U.S. stock indexes rose early Friday as investors took a weaker-than-expected reading of April retail sales in stride, after 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, as 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,
    +0.83%

    was up by about 263 points, or 0.8%, at 34,287.
  • The S&P 500
    SPX,
    +1.14%

    gained 37 points, or 0.9%, to trade at 4,149.
  • The Nasdaq Composite Index
    COMP,
    +1.67%

    climbed 140 points, or 1.1%, at 13,260.

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 recoverying from the COVID-19 pandemic.

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.

“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.”

Market bulls said inflation jitters would likely make for increased volatility, but that the bout of hot inflation will prove to be temporary, after being driven by a burst of pent-up demand and supply bottlenecks as the economy recovers from the coronavirus pandemic. Federal Reserve officials this week continued to emphasize that they expect such inflation pressures to be transitory, making it too early to consider unwinding its bond buying program or raising interest rates as they await a fuller recovery of the labor market.

“Either the U.S. inflation uptick is temporary, or the Fed is dangerously complacent. Either way, we’re going to see tolerance of higher inflation tested further in the months ahead,” said Kit Juckes, global macro strategist at Société Générale, in a note.

Equities bounced on Thursday, 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.

A May reading on consumer sentiment and March data on business inventories are due at 10 a.m.

Which companies are in focus?
  • The Walt Disney Co.
    DIS,
    -3.95%

    easily topped earnings expectations when it reported results Thursday afternoon, but shares of the Dow component were down 4.7% as the pandemic-fueled growth of its streaming services slowed.
  • A day after announcing that Tesla Inc.
    TSLA,
    +2.42%

    would no longer accept bitcoin
    BTCUSD,
    +3.12%

    as payment for its cars, Chief Executive Elon Musk suggested Thursday that parody crypto dogecoin
    DOGEUSD,
    +36.25%
    ,
    could be turned into a suitable replacement. Tesla shares were up 0.6%, while dogecoin jumped 32%.
  • Airbnb Inc.
    ABNB,
    +3.07%

    shares were down 2.4% after the company on Thursday reported continued resilience in its business, posting higher first-quarter revenue and increased gross bookings than expected, but with a larger-than-expected $1.2 billion loss.
  • Online retailer Farfetch Ltd.
    FTCH,
    +12.19%

    said Thursday that it had swung to a first-quarter profit on higher revenue as demand for luxury items online continued to grow. Shares were up 10%.
  • Shares of DoorDash Inc.
    DASH,
    +15.30%

    were up more than 9% after the food-delivery app company on Thursday reported gross orders of $9.9 billion for the first quarter, well above analysts’ expectations of $8.97 billion. In addition, its revenue nearly tripled, rising to $1.08 billion from $362 million in the year-ago quarter.
  • Coinbase Global Inc.
    COIN,
    +1.46%

    shares were up 1.1% after the crypto exchange delivered quarterly results late Thursday and said it would be adding dogecoin to its platform in the next six to eight weeks.
  • Shares of Graphic Package Holding Co.
    GPK,
    -0.18%

    jumped 1% after the consumer-packaging company announced an agreement Friday to buy AR Packaging Group AB for about $1.45 billion in cash from CVC Capital Partners Fund IV.
  • Tyson Foods Inc. TSN announced Friday it had reached a deal to sell its pet treats business for $1.2 billion to General Mills Inc. GIS. Tyson shares were up 1.3%, while General Mills shares were up 0.8%.
How are other assets faring?
  • The yield on the 10-year Treasury note TMUBMUSD10Y fell 2.6 basis points to 1.63%. 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 0.4%.
  • Oil futures traded sharply higher, with the U.S. benchmark CL00 adding 1.6% at $64.80 a barrel on the New York Mercantile Exchange. Gold futures
    GC00,
    +0.85%

    traded higher on the back of subdued yields and a weaker dollar, up 0.7% at $1,836.50 an ounce.
  • European equities climbed, with the Stoxx 600 SXXP up 0.7% and London’s FTSE 100 UKX, rising 0.8%.
  • 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%.

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