It was a rocky ride on Wall Street this past week with three days of triple-digit moves in the Dow, and the bears wining out in the end. With the exception of a nearly 1% gain in utilities, all other market sectors were in the red. Retail stocks were the primary culprit this week, despite a 1.3% gain in April retail sales. The rise, however, was concentrated in online buying vs. large mall-based department stores. This divergence in retail sent shares of Macy’s, Kohl’s and J.C. Penny sharply lower with weak sales, earnings and guidance reports; and the group was negative by nearly 1.5%. For the week, the Dow Industrials lost 1.2%, but the S&P 500 and the NASDAQ pared its losses by half as much. Declining stocks outpaced gainers with most of the losses coming from the aforementioned consumer retailers along with basic materials and financials.
A stronger dollar, weakness in commodity prices and credit woes in China were the primary factors for the decline. And a lack of leadership among the major market sectors exacerbated the overall negativity. The S&P 500 has been in a trading range for a while now, and there does not appear to be a strong enough catalyst to move stocks higher. Therefore, it looks as if the market will continue to move along in fits and starts with selective buying and selling as companies adjust to current economic conditions. Defensive stocks and utilities may take a small lead over materials, energy and other cyclicals – at least for now.
For the week ahead, the Labor Department will release the consumer price index for April, with pundits anticipating a 0.4% rise, up from 0.1% in March. The Federal Reserve folks will be keeping a sharp eye on the figure looking for any signs of inflation to boost short-term rates higher. Reports for housing starts and jobless claims will also move markets if there are any major surprises. As for earnings, more retailers will report first quarter results including aggressive choice Foot Locker. The athletic footwear and apparel store owner is estimated to have earned $1.39 per share ending April vs. $1.29 in the first quarter of 2015. We will also hear from Applied Materials with second quarter results of $0.32 vs. $0.29 and Deere & Co.’s second period with low expectations of $1.48 per share as compared to last year’s $2.03.
Here is the answer to last week’s trivia question: PETCO Park is home of Major League Baseball’s San Diego Padres. Prior to the opening of PETCO Park in 2004, the naming rights of the old Padre’s Stadium belonged to which other San Diego-based company? Sempra Energy, Jack-In-the Box, Kyocera USA or Qualcomm. Answer: Qualcomm. Formerly Jack Murphy Stadium, the multi-purpose venue opened in 1967 and remains the home of the San Diego Charges.
Today’s Trivia Question: Scotts Miracle-Gro Co., founded in 1868 as O.M. Scott & Sons, is a leading lawn and garden products manufacturer. Which product is not a Scotts’ brand offering? Ortho, RoundUp, Morning Song Bird Seed or Osmocote.