Earnings and economic data led to a mixed result for stocks on Friday.
United States
Stocks declined Friday as mediocre inflation and retail sales data weighed on banks while worries deepened about the retail sector of the economy. The Dow Jones industrials and S&P slipped 0.1 percent while the Nasdaq added 0.1 percent. For the week, the Dow lost 0.5 percent and the S&P was 0.3 percent lower. The Nasdaq was 0.3 percent higher.
Investors were risk averse during the week after President Donald Trump unexpectedly fired his FBI chief. The potential fallout could delay Trump’s pro-growth goals to cut taxes and boost spending on infrastructure. Soft retail sales and monthly inflation data Friday raised concerns about slow economic growth and questions about whether the Federal Reserve could maintain its hawkish outlook for interest rates this year.
Department stores were pressured for a second straight day after JC Penney reported lower than expected comparable store sales. Nordstrom dropped after weak quarterly same store sales. Macy’s retreated for a second day following its dismal quarterly report. Also lower were Kohl’s and Dillard’s. GE declined on a broker downgrade.
April retail sales were up 0.4 percent on the month after March’s upwardly revised increase of 0.1 percent (from a 0.2 percent decline). Excluding a rebound in auto sales, retail sales were up 0.3 percent for a second month. April consumer price index was up 0.2 percent after retreating 0.3 percent the month before. Excluding food and energy prices, core CPI inched up by 0.1 percent after slipping 0.1 percent in March. May preliminary consumer sentiment reading was 97.7, up from April’s final of 97.0.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was upUS$8.10 to US$1,231.25. Copper futures were up 0.6 percent to US$2.52. WTI spot crude was up 1 US cent to US$47.84. Dated Brent spot crude was up 7 US cents to US$50.84. The US dollar was up against the pound and the Canadian dollar. The currency declined against the yen, euro, Swiss franc and the Australian dollar. The Dollar Index was down 0.5 percent. The yield on US Treasury 30 year bond was down 4 basis points to 2.99 percent while the yield on the 10 year note was down 6 basis points to 2.33 percent.
Europe
European stock indices advanced Friday after Germany’s flash first quarter gross domestic product data and some M&A activity helped investors shrug off tepid corporate earnings and the unexpected decline in Eurozone industrial production. The FTSE was up 0.7 percent, the CAC gained 0.4 percent, the DAX advanced 0.5 percent and the SMI added 0.6 percent. For the week, The FTSE, DAX and SMI were up 1.9 percent, 0.4 percent and 1.2 percent respectively. The CAC however retreated 0.5 percent.
Thyssenkrupp declined after it said that it expects negative free cash flow in 2017 as capital spending increases due to higher prices for raw materials at a time of increased sales. Vivendi jumped after it made an offer to buy the Bolloré Group’s 60 percent stake in agency holding company Havas at a price of €9.25 per share. AstraZeneca was higher after announcing promising results from the trial of a cancer drug. Shire also was higher. Richemont was lower in Zurich after it warned of “volatility and uncertainty” after reporting a 46 percent slide in annual net profit. Novartis and Roche advanced. Nestle also finished higher. Standard Life was up after a broker upgrade.
March Eurozone industrial production dropped for a second straight month in March, defying expectations for a modest gain, as mild weather dampened energy output. Industrial output edged down a monthly 0.1 percent for a second month. German flash first quarter GDP was up 0.6 percent on the quarter and faster than the 0.4 percent expansion seen in the fourth quarter.
Asia Pacific
Asian stocks were mostly lower after disappointing US department store sales stoked worries about weak consumer spending in the US. Heightened political uncertainty in Washington triggered by President Donald Trump’s abrupt firing of FBI chief James Comey and the improving odds of a June rate increase by the Federal Reserve also kept investors cautious.
The Shanghai Composite was up 0.7 percent after the People’s Bank of China injected fresh funds through a medium-term lending facility to keep liquidity stable. China will host the Belt and Road Forum over two days starting May 14 in Beijing with an aim to revive an ancient trade route connecting the Middle Kingdom, Central Asia and Europe. The Hang Seng edged up 0.1 percent. On the week, the Shanghai Composite lost 0.6 percent while the Hang Seng added 2.0 percent.
The Nikkei was up 0.4 percent and the Topix gained 0.5 percent as the yen rose against the US dollar before the Group of Seven summit in Bari, Italy over the weekend and investors digested a slew of corporate earnings. On the week, the Nikkei was up 2.3 percent and the Topix was 2.0 percent higher. Nissan Motor surged on its plan to increase dividends although it forecast an unexpected decline in profits and its guidance was lower than expected.
Both the S&P/ASX and All Ordinaries were down 0.7 percent. Gains in the materials sector were offset by declines in banks. ANZ, Commonwealth, Westpac and Macquarie Group declined on concerns that it will be extremely difficult for banks to pass on all of the federal governments proposed A$6.2 billion levy to customers. Energy majors Oil Search, Santos, Beach Energy and Origin Energy were lower. But higher copper prices lifted mining stocks including BHP Billiton and Rio Tinto. For the week, the S&P/ASX was virtually unchanged while the All Ordinaries edged up 0.1 percent.
The Kospi was 0.5 percent lower Friday but added 2.0 percent on the week. The Sensex was down 0.2 percent but up 1.1 percent from a week ago.
Looking Forward

Central Bank activities

May 18

Eurozone

ECB Policy Meeting Accounts Published

The following indicators will be released this week…

Europe

May 16

Eurozone

Gross Domestic Product (Q1.2017 preliminary)

Merchandise Trade (March)

Germany

ZEW Survey (May)

Italy

Gross Domestic Product (Q1.2017 preliminary)

UK

Consumer Price Index (April)

Producer Price Index (April)

May 17

Eurozone

Harmonized Index of Consumer Prices (April final)

Italy

Merchandise Trade (March)

UK

Labour Market Report (April)

May 18

France

ILO Unemployment (Q1. 2017)

UK

Retail Sales (April)

Asia Pacific

May 15

Japan

Producer Price Index (April)

China

Industrial Production (April)

Retail Sales (April)

May 17

Japan

Machine Orders (March)

May 18

Japan

Gross Domestic Product (Q.1 2017 preliminary)

Australia

Labour Force Survey (April)

Americas

May 15

United States

Empire State Survey (May)

May 16

United States

Housing Starts (April)

Industrial Production (April)

May 17

Canada

Manufacturing Sales (March)

May 18

United States

Initial Unemployment Claims (week ending prior Saturday)

Philadelphia Fed Manufacturing Survey (May)

May 19

Canada

Consumer Price Index (April)

Retail Sales (March)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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