Equities bounced around the unchanged line on Thursday as tensions remain high (with stocks near-record levels ahead of possible interest rate hikes this year) but trading action was light (volume and price movements both modest). Traders are also ready to check out heading into the Memorial Day holiday weekend.
Weak economic data boosted crude oil and energy stocks on the anticipation of a delay in the Federal Reserve’s rate hikes, lifting trading initially before the ennui set in heading into the closing bell. Existing home sales, PMI manufacturing activity, and the Philly Fed index all missed expectations.
Data was weak globally as well with the China flash manufacturing PMI and the Eurozone composite PMI both missing.
In the end, the Dow Jones Industrial Average was unchanged, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.4% and the Russell 2000 lost 0.1%.
Energy was the star of the show today, with crude oil gaining 2.9% to close above $60 a barrel. Energy stocks as a group gained 0.8%. Aside from the weak economic data, traders pointed to a report of a small inventory draw from Cushing, Oklahoma as the catalyst for the move. The strength is likely to be short-lived, however, as the physical oil market remains in oversupply as Saudi Arabia ramps up production.
Storage capacity issues should come into play sometime around September as the summer driving season ends.
Best Buy Co Inc (NYSE:BBY) surged 3.9% after beating first-quarter EPS by 8 cents. It also beat on sales as management reaffirmed its second-quarter guidance. Earnings totaled 37 cents per share. Sales clocked in at $8.6 billion. The electronics retailer, which fell on hard times after the HDTV and PC upgrade cycles waned, managed its third straight quarter of positive same store sales growth.
The catalyst was the fast dropping price of 4K Ultra-HD televisions — offering videophiles something new to lust over — as well as the strong demand for the Apple Inc. (NASDAQ:AAPL) iPhone 6 models. While Best Buy’s management said it was “too early” to talk about Q4 results, there is evidence that consumers will be better positioned in the second half of the year to boost spending.
Retail stocks in general, represented by the SPDR S&P Retail (NYSEARCA:XRT), have been drifting lower in recent weeks but are poised to break above their 50-day moving average. Retailer results have been mixed — with strength in names like BBY offset by weakness in names like Wal-Mart Stores, Inc. (NYSE:WMT) — but the overall impression is that the U.S. consumer is going to have a much better second half of the year.
For one, wage inflation appears to be just around the corner as the unemployment rate stands at 5.4% and is set to move lower. Also, lower gas costs have been used to boost savings and pay down credit card debt — freeing up purchasing power for later in the year.
Friday should bring some excitement as Fed chairman Janet Yellen is scheduled to speak at 1 p.m. ET on the economic outlook in Rhode Island. Her comments will be closely monitored for clues as to whether a June interest rate hike is still on the table.
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