U.S. equities dribbled lower in uneventful trading on Friday. Focus remained on retail stocks, which are getting pummeled amid disappointing earnings results, competitive pressure from online titans like Amazon.com, Inc (NASDAQ:AMZN), and weak overall retail sales.
In the end, the Dow Jones Industrial Average lost 0.1%, the S&P 500 lost 0.2%, the Nasdaq Composite gained 0.1% and the Russell 2000 lost 0.5%. Treasury bonds rallied, the dollar was weaker, gold gained 0.3% and oil was little changed.
Breadth was negative with 1.3 decliners for every advancing issue on the NYSE while volume was light, at 88% of the 30-day average. Defensive utility stocks led the way with a 0.5% gain while industrials were the laggards, down 0.7%.
J C Penney Company Inc (NYSE:JCP) was slammed 14% on weak revenues and comp-store sales, which fell 3.5% from the year ago period. Nordstrom (JWN) fell 10.8% on a 6.4% drop in comp-store sales. And in an indication that even other online retailers are at risk, Wayfair Inc (NYSE:W) fell 6% on reports AMZN is launching a new furniture seller’s program.
On the economic front, retail sales increased at a weaker-than-expected 0.4% month-over-month rate. Internet category sales increased 1.4% while general merchandise sales were down 0.5%. Consumer price inflation slowed to a 1.9% annual rate, down from 2.0%, to the lowest level since October 2015.
Further pilling on retailers, Wells Fargo analysts noted that the U.S. market is “over-stored” with roughly five-times the retail square footage per capita as other major economies. Consumer preferences (or necessities) are also shifting, with apparel losing wallet share amid higher spending on healthcare, housing, and education. Cowen analysts cited the “rise of authenticity and uniqueness as a deep consumer interest” as a headwind for retailers in the years ahead.
Looking ahead, next week will feature updates on manufacturing activity, the leading economic indicators, and housing market activity. Keep an eye on the situation in China amid ongoing market turmoil and a yield curve “inversion” that’s historically been a sign of looming economic trouble.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. A two-week and four-week free trial offer has been extended to Investorplace readers. Redeem by clicking the links above.