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Market Update

Freaky Friday for Stocks as Street Digests Soggy Data, Questions Fed

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November 13, 2015

Broad stock averages headed lower Friday and put a streak of weekly wins in jeopardy. Is the bad luck of Friday the 13th at work? Probably not. This lower run may surprise few on Wall Street considering continued energy weakness and worries that improving job conditions aren’t translating to robust consumer spending. Weak retail-sector earnings and government-issued retail sales figures issued Friday morning contributed to Wall Street’s cautious sentiment.

Comments from Federal Reserve officials this week signaling their interest in policy action sooner versus later have kept expectations for a December rate hike in play. It’s a mixed economic picture that has induced stock market indecision in recent sessions.

The Fed and Wall Street are mulling these latest stats: retail sales in October climbed just 0.1%, the Commerce Department said. Economists had expected a far-stronger reading of 0.3%. Excluding volatile items such as gas and autos, sales rose 0.3%. September sales were revised down to a flat reading from a previous reading of 0.1% growth.  Another measure of U.S. consumer confidence will hit this morning: the University of Michigan’s consumer-sentiment index is slated for release at 10 a.m. Eastern.

Also reported, U.S. producer prices dropped 0.4% in October, likely a result of lower sales at retailers. Street economists had expected the measure to climb 0.2%. Excluding volatile items, core prices fell just 0.1%. 

Against this backdrop, major stock benchmarks are on track for a weekly loss—their first after a string of six weekly gains. In fact, that streak had been the longest since late 2014. The Dow Jones Industrial Average ($DJI) and S&P 500 (SPX) (figure 1) face weekly losses of roughly 2.5%, while the NASDAQ Composite (COMP) is setting up for a potential 2.7% weekly decline.

SPX stock chart

FIGURE 1: NOW THAT’S A PULLBACK.

The S&P 500 (SPX), charted on the new-look thinkorswim® platform, declined in six of the last seven sessions through Thursday. With a close near 2045, the broad index hit its lowest level since October 22. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

More Retailers Hit Rough Patch. Nordstrom (JWN) shares tumbled after missing Wall Street’s profit and sales estimates for its Q3. The retailer earned $0.42 a share, well below Street forecasts of $0.73, while sales of $3.2 billion came in $200 million short. Get this: J.C. Penney Co. (JCP) reported Street-beating sales growth, citing strength in all of its merchandise divisions, and lifted profit estimates for the year. But shares are still lower, sucked into the weakness seen across most mall-based retailers as the holiday season looms.

Tech in Focus, Too. Cisco Systems (CSCO) fell late Thursday and early Friday after the networking-equipment maker projected revenue and profit in the current quarter below Street analyst estimates.

Oil, Oil Everywhere. International Energy Agency data revealed oil stockpiles grew to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere. This "massive cushion has inflated" even as the saturated global oil market adjusts to roughly $50 a barrel oil, the agency said in its November report. Notably, the IEA predicts that supplies outside OPEC will decline next year by the most since 1992 as low prices reduce the motivation to produce in the U.S. shale industry. U.S.-traded crude futures early Friday are near $42 a barrel after dropping some 4% in Thursday’s session alone.

Good trading,

JJ

@TDAJJKinahan

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