U.S. and Chinese officials this weekend are meant to review China’s compliance with the phase one trade deal
Stocks traded near unchanged Friday, after initially edging lower following a weaker-than-expected rise in July retail sales raised questions about the durability of the economy’s snapback from its pandemic-induced collapse in the spring.
Market participants were also bracing for a round of virtual trade talks between the U.S. and China this weekend against a backdrop of rising tensions between the two countries.
What are major indexes doing?
The Dow Jones Industrial Average DJIA,
The Dow on Thursday fell 80.12 points, or 0.3%, to end at 27,896.72, while the S&P 500 SPX,
What’s driving the market?
Retail sales rose 1.2% in July, the third straight monthly increase but weaker than the 2% rise forecast by economists surveyed by MarketWatch. Excluding autos and gasoline, sales rose 1.5%, beating expectations for a 1.1% increase. June sales were revised higher.
Meanwhile, analysts said the continued deadlock between congressional Democrats and the White House over a coronavirus aid package could be limiting upside for the market. Negotiations to extend measures, including $600 a week in additional unemployment benefits, that expired at the end of July have remained stalled since the end of last week. President Donald Trump last weekend signed executive orders that would partially extend some measures but those face questions about their legality and logistics.
“We have had recent good news on the jobs front and retail sales in July are up from a year ago. But in the risk category is consumer confidence which has been deteriorating in recent weeks with fear that a much needed fiscal support package may not happen,” said David Donabedian, chief investment officer of CIBC Private Wealth Management.
“Income support from the government has been critical and there is a big risk to the economy and the stock market if it does not continue,” he said.
Economists warned that the retail data indicated consumer spending had lost some steam, underlining fears of a further slowdown.
The data “underscores that wary consumers have turned more cautious amid a virus resurgence and fading stimulus support,” said Lydia Boussour, senior economist at Oxford Economics. She said the data also matches up with a stall in the firm’s own recovery tracker, confirming that “consumers are likely to keep a tight rein on their spending until a medical solution to the pandemic is found.”
Meanwhile, virtual talks between U.S. and Chinese officials this weekend are meant to review China’s compliance with the phase one trade deal agreed last year. Unease surrounds the talks given growing tensions over China’s actions in Hong Kong and other issues.
The tone for global equities wasn’t helped by a 1.1% decline in Chinese retail sales in July, versus expectations for a flat reading.
In other data, second-quarter productivity rose by 7.3%, while unit labor costs jumped 12.2%. Economists were looking for a 1.4% productivity rise and an 8.7% rise in costs.
July industrial production saw a 3% rise, topping forecasts for an increase of 2.7%, though the index remains far below pre-pandemic levels. Capacity utilization last month rose to 70.6% from 68.5% in June, versus expectations for a reading of 70.5%.
An initial reading on the University of Michigan’s August consumer sentiment index came in at 72.8 compared with expectations for 72.
Which companies are in focus?
- Epic Games, the maker of “Fortnite” launched a legal battle with Apple Inc. AAPL,
-0.58%and Google parent Alphabet Inc. GOOG, -0.39%GOOGL, -0.34%, accusing the tech giants of illegally exploiting a monopoly on app and in-app purchases.
- Shares of Applied Materials Inc. AMAT,
+4.13%rose 4% after the chip maker supplier late Thursday reported results and an outlook that topped Wall Street forecasts.
- DraftKings Inc. DKNG,
-5.82%shares were off more than 6% after the company reported a wider-than-expected loss, though revenues topped Wall Street expectations. Pressure was also attributed to a Bloomberg report that the Internal Revenue Service will require fantasy sports companies to pay federal excise taxes on their entry fees.
How are other markets trading?
The yield on the 10-year Treasury note TMUBMUSD10Y,
Gold prices GC00,
The greenback continued its slide, with the ICE U.S. Dollar Index, DXY,