Stocks dribbled lower on Friday after a triumphant rally to new record highs on Thursday — in the face of many fundamental headwinds including an ongoing earnings recession, trying valuations, the specter of Federal Reserve interest rate hikes and crowded long positions. Trading was quiet and volumes light. Just 698 million shares traded hands on the New York Stock Exchange, less than 85% of the 30-day average volume.
In the end, the Dow Jones Industrial Average lost 0.2%, the S&P 500 Index lost 0.1%, the Nasdaq Composite gained 0.1% and the Russell 2000 gained 0.1%. Elsewhere, Treasury bonds strengthened, the dollar weakened, gold lost 0.5% and oil rose on ongoing chatter about a OPEC production freeze (a nauseating recycling of the headlines from February-April).
Energy prices have been benefiting from a short squeeze dynamic, as things like record Saudi production and swollen inventories are being ignored. Plus the fact that the U.S. drilling rig count climbed another 3.7% last week to 481, its seventh straight weekly gain.
Energy stocks led the way with a 0.7% gain. J C Penney Company Inc (NYSE:JCP) gained 6.1% on a smaller-than-expected quarterly loss on better comp-store sales. Nordstrom, Inc. (NYSE:JWN) gained 8% on an earnings beat thanks to a narrower comp-store sales decline. Nvidia Corporation (NASDAQ:NVDA) gained 5.6% on a top- and bottom-line beat on strength in its gaming and data center businesses.
Materials lagged on the downside, losing 1.2%. Steelmakers were hit hard, with the Market Vectors Steel (ETF) (NYSE:SLX) down 2.9%.
On the economic front, the big news was a disappointing July retail sales report. Sales were unchanged vs. June compared to the 0.4% rise that was expected. Ex-autos sales dropped 0.3% vs. the 0.1% rise expected. The result ended three consecutive months of gains and suggests consumers have suddenly turned cautious.
Looking ahead, next week will feature more Federal Reserve chatter as the July meeting minutes are released and we get an update on consumer price inflation.