Stocks Close Mixed but Post Another Week of Gains…..
U.S. equities finished mixed, but were still able to string together a third consecutive week of gains despite an up and down week of trading. Optimism surrounding the potential for a fiscal relief package reemerged, while a surprising jump in retail sales and a rise in consumer sentiment also helped the markets climb higher. The renewed optimism on additional stimulus was jumpstarted by yesterday’s comments from Treasury Secretary Mnuchin who indicated that he may cede some ground in the negotiations, as well as President Trump’s comments that he would raise his offer. On the virus front, Pfizer announced that its vaccine candidate being developed in conjunction with BioNTech may soon be ready for application for Emergency Use Authorization. In other equity news, Bank of Mellon New York bested estimates and Boeing was back in the headlines. Treasury yields were higher as bond prices dipped following the data and the U.S. dollar lost ground, while crude oil prices fell and gold turned lower. Asia finished lower to close out the week, while markets in Europe rebounded from yesterday’s widespread losses.
The Dow Jones Industrial Average increased 112 points (0.4%) to 28,606, the S&P 500 Index was unchanged at 3,484, and the Nasdaq Composite lost 42 points (0.4%) to 11,672. In moderate volume, 888 million shares were traded on the NYSE and 3.1 billion shares changed hands on the Nasdaq. WTI crude oil was $0.12 lower at $41.12 per barrel and wholesale gasoline lost $0.01 to $1.17 per gallon. Elsewhere, the Bloomberg gold spot price lost $8.74 to $1,899.97 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% lower at 93.70. Markets were higher for the week, as the DJIA gained 0.1%, the S&P 500 increased 0.2%, and the Nasdaq Composite rose 0.8%.
Retail sales trounce estimates, industrial production falls and sentiment improves…..
Advance retail sales for September jumped 1.9% month-over-month (m/m), well above the Bloomberg forecast of a 0.8% increase following August’s unadjusted 0.6% gain, and at the fastest pace in three months. Last month’s sales ex-autos increased 1.5% m/m, compared to expectations of a 0.4% rise and August’s downwardly-revised 0.5% gain. Sales ex-autos and gas were also up 1.5% m/m, compared to estimates of a 0.5% increase, and August’s reading was adjusted downward to a 0.5% rise. The control group, a figure used to calculate GDP, gained 1.4% m/m, above projections of a 0.3% increase and versus August’s negatively-adjusted 0.3% decline.
Sales for clothing and accessories led the gains, with sporting goods, music and books also higher, as well as building materials and garden equipment and supplies. Sales at food and beverage stores moderated amid a decline at grocery stores, and sales at nonstore retailers—which includes online activity—came in slightly lower. The surprising jump in the overall figure comes despite the expiration of emergency relief measures and the continued stalemate in Washington on a fiscal relief deal.
The September preliminary University of Michigan Consumer Sentiment Index increased to 81.2 versus expectations of a slight improvement to 80.5 from September’s 80.4 reading. The index hit the highest level since March as a decline in the current conditions portion of the index was offset by an increase in the expectations part of the survey. The 1-year inflation forecast increased to 2.7% from September’s 2.6% rate, and the 5-10 year inflation forecast dipped to 2.4% from the prior month’s 2.7% level.
The Federal Reserve’s industrial production fell 0.6% month-over-month (m/m) in September, well short of estimates for a 0.5% gain, and versus August’s unadjusted 0.4% increase. Manufacturing output fell 0.3%, somewhat paring the solid rebound from April’s record drop, and utilities lost ground, while mining production rose 1.7%. Capacity utilization declined to 71.5% from the prior month’s upwardly-revised 72.0% rate, compared to forecasts of 71.8%. Capacity utilization is 8.3 percentage points below its long-run average, but 7.3 percentage points north of the low set in April.
Business inventories moved 0.3% higher m/m in August, versus forecasts calling for a 0.4% increase, and versus July’s unadjusted 0.1% gain.
Treasuries were lower, with the yield on the 2-year little changed at 0.14%, and the yields on the 10-year note and 30-year bond up 1 basis point (bp) at 0.74%, and 1.52%, respectively.
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