U.S. stocks closed higher 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.
But the sharp gains weren’t weren’t large enough to reverse weekly losses for the major stock benchmarks, 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,
+1.06% jumped 360.68 points Friday, or 1.1%, to 34,382.13. The Dow was down 1.1% for the week. - The S&P 500 SPX,
+1.49% gained 61.35 points, or 1.5%, to 4,173.85. The index posted a weekly loss of 1.4%. - The Nasdaq Composite Index COMP,
+2.32% surged about 304.99 points, or 2.3%, to 13,429.98. The tech-heavy Nasdaq remained down 2.3% for the week.
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 in 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.
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.”
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 rose 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.
Meanwhile, 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?
- The Walt Disney Co. DIS,
-2.60% easily topped earnings expectations when it reported results Thursday afternoon, but shares of the Dow component fell 2.6% Friday as the pandemic-fueled growth of its streaming services slowed. - A day after announcing that Tesla Inc. TSLA,
+3.16% would no longer accept bitcoin BTCUSD,-2.01% as payment for its cars, Chief Executive Elon Musk suggested Thursday that parody crypto dogecoin DOGEUSD,-5.58% , could be turned into a suitable replacement. Tesla shares rose 3.2%, while dogecoin jumped about 44%. - Airbnb Inc. ABNB,
+4.01% shares rose 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,
+12.51% 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 12.5%. - Shares of DoorDash Inc. DASH,
+22.15% surged 22.2% 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,
-2.54% shares fell 2.5% 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,
-1.70% fell 1.7% 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. Shares of both Tyson TSN,
-0.27% and General Mills GIS,-0.91% fell less than 1%.
How are other assets faring?
- The yield on the 10-year Treasury note TMUBMUSD10Y fell about 3 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 0.5%.
- West Texas Intermediate crude for June delivery rose $1.55, or 2.4%, to settle at $65.37 a barrel on the New York Mercantile Exchange. June gold GCM21, 1.04% GC00, 1.04% rose $14.10, or 0.8%, to settle at $1,838.10 an ounce on Comex.
- 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
