NEW YORK, NEW YORK – MAY 11: People visit the Charging Bull statue in Wall Street on May 11, 2021 in New York City. New York Governor Andrew Cuomo announced pandemic restrictions to be lifted on May 19. (Photo by Noam Galai/Getty Images)
Wall Street was mixed in Thursday’s early trade, after a stronger-than-expected report on retail sales suggested consumer spending held up despite concerns over the Delta variant, as jobless claims held near a pandemic-era low.
Traders weighed economic data showing an unexpected rise in spending last month, even as the latest wave of the coronavirus spread across the U.S. The Commerce Department’s August retail sales report showed overall sales rose by 0.7% on the month after a downwardly revised 1.8% drop in July. Consensus economists were looking for a 0.7% drop, according to Bloomberg data.
Meanwhile, new unemployment claims posted an unexpected but marginal gain, rising to 332,000 but holding within view of COVID-19 era lows.
The latest data served as another indicator of the relative strength in economic activity after an initial reopening surge in late spring and summer. While many economists have agreed the overall trend is of decelerating growth, the actual extent of the deceleration remains to be seen.
This uncertainty has also left equity investors closely monitoring the incoming data for signals of how the economic backdrop could impact the earnings picture for major companies. Amid concerns including the Delta variant, ongoing supply chain constraints, labor shortages and a potential policy pivot by the Federal Reserve, the S&P 500 has so far fallen 0.9% in September.
“Equity markets have been positive for seven consecutive months, which is quite rare … So yes, investors are rightly concerned,” Akshata Bailkeri, Bruderman Asset Management equity analyst, told Yahoo Finance. “But the the reason why we’re seeing this is because these earnings behind a lot of these companies are continuing to grow, and that’s really what’s driving these index values higher.”
As FactSet pointed out in its latest weekly report, consensus analysts are still looking for S&P 500 earnings growth of nearly 28% for the third quarter. While a deceleration from the more than 80% growth rate posted in the second quarter of this year, that would still mark the third-highest year-over-year increase in earnings for the index since 2010. Third-quarter earnings reporting season is set to pick up next month.
“I don’t think statistics or just how long it’s been is a good reason [for a market correction]. Generally, you need some sort of a negative catalyst,” Randy Frederick, Charles Schwab’s managing director of trading derivatives, told Yahoo Finance. “What we have right now is not negative catalysts so much as a lack of positive catalysts.”
“I think what has caused some of this more recent volatility is that we’ve had a number of Wall Street firms that have downgraded both GDP estimates and corporate earnings estimates,” he added. “Those are just forecasts; they may turn out not to be right. Certainly the last two quarters, the earnings results have substantially outperformed the expectations bar.”
Here’s where major benchmarks were trading at the open bell:
Retail sales unexpectedly increased in August after dropping in July, suggesting the consumer held up more strongly than expected despite the latest wave of the Delta variant.
Sales rose by 0.7% on the month, versus a drop of the same margin expected, according to Bloomberg consensus data.
The increase came as categories including non-store retailers, or e-commerce outlets, posted notable monthly rises. Non-store retailer sales rose by 5.3% in August. Meanwhile, furniture and home furnishing store sales rose by 3.7%, and general merchandise stores’ sales rose by 3.5%.
Food services and drinking places sales were flat on the month but were still up 32% over last year. Clothing and accessory store sales — another proxy for the reopening — increased by just 0.1%.
Meanwhile, a separate report from the Labor Department on Thursday showed new weekly jobless claims rose by 332,000 last week, coming in 10,000 greater than expected. Still, this was just a slight jump from the prior week’s pandemic-era low of 312,000.
“On the face of it, it is disappointing but not entirely surprising to see a slight increase in new jobless claims given the toll taken by the Delta variant. Countering that somewhat is the decline in continuing claims to a fresh pandemic era low,” said Mark Hamrick, senior economic analyst at Bankrate, in a statement.
Here’s where markets were trading Thursday morning:
Here were the main moves in markets as of Wednesday evening: