September 17, 2019

Stocks Slip Lower, Continuing a Trend

Stocks slipped lower on Friday, a day after the largest drop on Wall Street in nearly two months set major indexes on course for their second consecutive weekly decline.

In early trading the Standard Poor’s 500-share index was down 0.2 percent, the Dow Jones industrial average fell 0.1 percent and the Nasdaq composite was unchanged.

Investors are concerned the economic recovery is slower than they had hoped as corporate revenue growth has disappointed even as companies’ bottom-lines have hit the mark.

“We haven’t seen the revenue growth the market was anticipating,” said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City.

“We are unlikely to see a large-scale correction in the market right now, but it certainly is losing the momentum that took it to strong highs earlier this year,” he said.

From Wal-Mart and Gap to Macy’s and McDonald’s, chains that cater to middle- and lower-income Americans are feeling the pinch of an uneven economic recovery.

Nordstrom, the luxury department store chain, reported lower-than-expected revenue in its second quarter Thursday, prompting the company to trim its full-year sales and profit forecasts. Its shares fell 2.9 percent.

Across the Atlantic, surprisingly strong growth in France and Germany dragged the euro zone out of an 18-month recession and data showed Britain’s recovery gathering momentum.

Growth in China’s giant economy also appears to be stabilizing, and Japanese exports for July due on Monday are forecast to show the fastest growth in over three years.

“The global economy is improving and even if the Fed does taper in September they are unlikely to move in a significant fashion, so the caution is perhaps overdone,” said Chris Beauchamp, market analyst at IG.

In Europe, stock markets were generally lower, with the FTSEurofirst 300 index of blue chips 0.2 percent lower. Asian markets ended the session down, with Japan’s Nikkei off 0.8 percent, and China’s Shanghai composite 0.6 percent lower.

Expectations that the Federal Reserve would scale back its bond buying next month drove the yield on the benchmark 10-year Treasury note up to 2.78 percent in Europe, sent the dollar down 0.1 percent against a basket of currencies and the euro up to $1.3372.

“Given that the 10-year U.S. yields are headed towards 3 percent, we think the general direction is for a stronger dollar,” said Tom Levinson, FX strategist at ING.

Data on Friday showed housing starts and permits for future home construction in the United States rose less than expected in July, suggesting that higher mortgage rates could be slowing the housing market’s momentum.

United States nonfarm productivity rose in the second quarter after a surprise decline in the first one, separate data showed.

Pandora Media shares jumped 6.7 percent following a bullish call on the stock from Goldman Sachs.

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Markets Tumble on Wal-Mart Earnings and Fed Uncertainty

Stocks on Wall Street fell the most since late June on Thursday in the wake of disappointing results from Wal-Mart and Cisco, and sturdy economic data that may set the stage for the Federal Reserve to scale back its stimulus soon.

In afternoon trading the Standard Poor’s 500-stock index was down 1.6 percent, the Dow Jones industrial average lost 1.4 percent and the Nasdaq composite fell 1.8 percent.

New claims for jobless benefits fell to near a six-year low last week, and consumer prices rose broadly in July, two reports that could draw the Fed closer to trimming its $85 billion monthly bond-buying program.

The Fed’s stimulus measures have kept interest rates low and buoyed equity markets this year, but on Thursday, United States Treasury yields hit two-year highs. Higher rates raise borrowing costs for consumers and companies and reduce the attractiveness of equities relative to higher-yielding bonds.

“The speed at which bond yields have increased has caught investors off-guard,” said Dan Greenhaus, chief global strategist at BTIG in New York.

Wal-Mart shares fell 2.3 percent after the discount retailer posted disappointing same-store sales and missed revenue estimates for a fifth consecutive quarter. The company also lowered its revenue and profit forecasts for the year.

“The Wal-Mart earnings report is as big a macro indicator as” gross domestic product data, said Nicholas Colas, chief market strategist at ConvergEx Group in New York.

It shows that consumer spending “isn’t that strong yet — inflation is rising, wages are not, unemployment is still pretty high and that’s not a recipe for a strong retail environment,” he said.

Trading volume was low, as it tends to be in August, and will likely remain lackluster as earnings season winds down.

The technology sector was the biggest laggard on the S. P. 500, weighed down heavily by Cisco Systems, which fell 6.9 percent as a slew of brokerages cut their price targets on the stock. The network equipment maker said recently it will cut 4,000 jobs, or 5 percent of its work force.

One of the few bright spots in retail earnings was Kohl’s, which reported a rise in quarterly same-store sales, sending its stock up 5 percent.

European markets closed lower, with the FTSE 100 index off 1.6 percent. Asian markets ended the trading day mixed, weakened by Mr. Bullard’s comments; Japan’s Nikkei was 1.3 percent higher, while China’s Shanghai composite lost 0.3 percent.

In commodity markets, supply worries linked to the growing violence in Egypt and the brighter global growth outlook pushed oil prices higher and kept copper near a nine-week high.

A state of emergency was declared by the Egyptian government on Wednesday after deadly clashes between riot police and supporters of ousted President Mohamed Morsi. Investors fear the political turmoil could choke off traffic in the Suez Canal or spill over into big oil-producing nations.

“Egypt may not be a major oil producer but the Suez Canal is an important gateway, not just for oil flows but also for commodities,” said Carl Larry, president of the consultancy Oil Outlook and Opinions, based in Houston. “If there is any disruption or if the violence results in the shutting down of the canal, the impact will be quite severe.”

Benchmark crude in New York rose 60 cents a barrel, to $107.45.

Gold was off 0.3 percent, at 1,330.10 an ounce.

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