Closing Market Summary: Averages Trim Early Losses to End Little ChangedThe market appeared in position to break this week's sideways trend to the downside, but an afternoon recovery helped the major averages trim their losses. The S&P 500 and the Nasdaq shed 0.2% apiece while the Dow (-0.1%) settled just a tick higher. The small-cap Russell 2000 underperformed, losing 0.7%.
Earnings were problematic on Thursday with retailers receiving the biggest blow. Macy's (M 24.35, -4.99) plunged 17.0% after the company reported worse than expected earnings/revenues and a 5.2% decline in comparable store sales. Similarly, Kohl's (KSS 37.16, -3.16) dropped 7.8% in reaction to disappointing top-line results. In the end, the retail industry's poor performance can be summed up with the SPDR S&P Retail ETF (XRT 42.91, -1.19), which declined 2.7%. Unsurprisingly, the retail-heavy consumer discretionary sector (-0.6%) finished near the bottom of the day's leaderboard.
Snap (SNAP 18.05, -4.93) was also hit by a wave of selling pressure after its first earnings report as a public company fell short of expectations. The company missed both top and bottom line estimates in addition to undershooting the target for daily active user growth. SNAP shares settled with a big loss of 21.5%. However, the company's tumble didn't have much sway over the technology sector (-0.2%), which closed in line with the broader market, thanks in part to a solid showing from chipmakers. The PHLX Semiconductor Index added 0.3%.
Crude oil underpinned the energy sector (-0.2%) for a while again on Thursday, climbing 1.1% to $47.80/bbl, as investors continued to cheer yesterday's bullish EIA inventory report. However, the energy space slipped in the late afternoon to finish in line with the benchmark index.
Conversely, the consumer staples sector (+0.1%) held its slight edge to the end, helped by Whole Food Market's (WFM 37.03, +0.78) latest earnings report. The company jumped 2.2% after reporting better than expected revenues, increasing its dividend, announcing a share repurchase program, and appointing five new independent directors and a new CFO. A handful of other sectors also showed relative strength, including health care (+0.1%), industrials (unch), and utilities (unch).
For the remaining groups, financials (-0.5%), real estate (-0.5%), and telecom services (-0.5%) underperformed while the materials space (-0.3%) settled roughly in line with the broader market.
U.S. Treasuries settled slightly higher with the benchmark 10-yr yield (2.40%) dropping two basis points. The CBOE Volatility Index (VIX 10.53, 0.32, +3.1%) also signaled increased caution, closing above the 10.00 mark for the first time this week.
It is worth adding that Moody's downgraded six major Canadian banks by one notch apiece, citing a more challenging operating environment for banks in Canada due to a sharp increase in household debt and housing prices. The Canadian dollar (1.3695) shed 0.3% against the U.S. dollar today, but is down nearly 3.0% over the past month despite the U.S. Dollar Index declining 1.1% in that timeframe.
On the data front, investors received April PPI and Initial Claims:
- April producer prices increased 0.5%, which is above the consensus of 0.2%. Core producer prices rose 0.4% while the consensus expected an increase of 0.2%.
- The key takeaway from this report is that inflation pressures picked up for producers in April and that is going to create some concerns about a pass-through effect to consumers, particularly since there were price pressures noted across all four stages of intermediate demand.
- The latest weekly initial jobless claims count totaled 236,000 while the Briefing.com consensus expected a reading of 242,000. Today's tally was below the unrevised prior week count of 238,000. As for continuing claims, they declined to 1.918 million from the revised count of 1.979 million (from 1.964 million).
- The jobless claims data certainly fits well with the tight labor market narrative even if the subdued average hourly earnings growth seen in the April employment report does not.
Tomorrow, market participants will receive April CPI (consensus 0.2%) and April Retail Sales (consensus 0.6%) at 8:30 ET and then March Business Inventories (consensus 0.1%) and the preliminary reading of the University of Michigan Consumer Sentiment Survey for May (consensus 96.5) at 10:00 ET.
- Nasdaq Composite +13.6% YTD
- S&P 500 +7.0% YTD
- Dow Jones Industrial Average +5.9% YTD
- Russell 2000 +2.4% YTD
