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Wall Street Holds Near Record Friday 08/14 09:45
U.S. stocks are drifting around their record heights Friday following the
latest report on the economy to come in surprisingly weak, this time about how
much shoppers are spending at retailers.
NEW YORK (AP) -- U.S. stocks are drifting around their record heights Friday
following the latest report on the economy to come in surprisingly weak, this
time about how much shoppers are spending at retailers. Such data could keep
interest rates low, which is something Wall Street loves, but it also raises
the risk of a worst-case economic scenario of slow growth and high inflation.
The S&P 500 was virtually unchanged, coming off its all-time high set the
day before. The Dow Jones Industrial Average was down 24 points, or less than
0.1%, as of 10:30 a.m. Eastern time, and the Nasdaq composite was 0.2% lower.
Treasury yields were also mixed in the bond market after a report showed
shoppers spent less at U.S. retailers last month than the month before. That
surprised economists, who were forecasting another month of growth.
On the bright side for financial markets, such a pullback in spending could
take pressure off inflation. Inflation remains much higher than anyone would
like, but reports earlier this week suggested the pace of increases in prices
is decelerating.
If inflation keeps trending that way, it could encourage the Federal Reserve
to hold off on hikes to interest rates. Higher rates would help keep a lid on
inflation, but they do so by intentionally slowing the economy and making it
more expensive for everyone to borrow money.
But the downside of such data, including last week's surprisingly weak
report on the U.S. job market, is that they also raise the risk of a slowing
economy. The Fed has no good tool to fix both a stagnating economy and high
inflation at the same time, which is why what's called "stagflation" is seen as
a worst-case scenario.
Some on Wall Street cautioned against overreacting to the weak data on U.S.
retail sales, even if it was broad based. It could simply be a snap back after
retail sales in earlier months were boosted by unusual factors such as big tax
refunds, the World Cup and even an earlier Prime Day event at Amazon, according
to Jennifer Timmerman, senior investment strategy analyst at Wells Fargo
Investment Institute.
U.S. consumers nevertheless appear to be getting more discouraged about the
economy. A preliminary survey by the University of Michigan suggested sentiment
among them is weakening by more than economists expected.
The survey said drops occurred across the political spectrum and showed up
particularly among older, lower-income and other groups who can be hurt most by
inflation.
On Wall Street, Reddit jumped 13% after learning its stock will join the S&P
500 index on Tuesday. Many professional investors and funds closely track the
index, either mimicking it or at least measuring their performance against it.
That can push many investors to buy a stock automatically when it enters the
index.
Applied Materials fell 4.9% even though the company, whose technology helps
make semiconductors, reported stronger profit and revenue for the latest
quarter than analysts expected. CEO Gary Dickerson said global hunger for
artificial-intelligence technology helped it deliver another record quarter.
But its stock had already more than doubled this year and built expectations
very high, which helped pressure the stock on Friday.
AI stocks in general have been swinging sharply on worries that their prices
shot too high because of AI euphoria and that their strong growth in revenue
may not be sustainable.
In the oil market, prices were relatively steady following big recent swings
as hopes rose and fell about when the war with Iran will allow tankers to carry
crude again from the Middle East again to customers worldwide. The price for a
barrel of Brent crude rose 0.4% to $87.46 after drifting earlier between gains
and losses.
In the bond market, shorter-term Treasury yields eased following the retail
sales report, suggesting traders see the Fed as less likely to hike interest
rates at its next meeting in September.
But the yield on the 10-year Treasury, which moves more on expectations for
inflation and economic growth in upcoming years, rose to 4.66% from 4.63% late
Thursday.
In stock markets abroad, indexes were mixed in Europe and Asia.
London's FTSE 100 slipped 0.1% after Nigel Farage regained the seat in
Parliament he quit a month ago, beating trash-can wearing comic candidate Count
Binface in a special election.
South Korea's Kospi again had one of the world's sharpest moves and jumped
2.4% for its third straight gain of at least that much. Seoul has been at the
center of the world's swings for artificial-intelligence stocks because its
market is dominated by two tech giants, Samsung Electronics and SK Hynix.
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