Wall Street mostly fell on Thursday after getting a fleeting boost from a stronger-than-expected report on retail sales that suggested consumer spending held up despite concerns over the Delta variant. Jobless claims also came in near a pandemic-era low.
With COVID-19 fanning fears of a slowdown both in the U.S. and China, investors are carefully weighing economic data. August retail sales showed an unexpected rise, 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."
4:06 p.m. ET: S&P 500, Dow end choppy session lower after retail sales, initial jobless claims come in mixed
Here were the main moves in markets as of 4:06 p.m. ET:
S&P 500 (^GSPC): -6.95 (-0.16%) to 4,473.75
Dow (^DJI): -63.07 (-0.18%) to 34,751.32
Nasdaq (^IXIC): +20.39 (+0.13%) to 15,181.92
Crude (CL=F): Unchanged at 72.61
Gold (GC=F): -$39.90 (-2.22%) to $1,754.90 per ounce
10-year Treasury (^TNX): +2.7 bps to yield 1.3310%
1:11 p.m. ET: What economists are saying about the August retail sales report
The surprise rise in August retail sales came in contrast to a number of other key economic data points as of late, with many of these having disappointed to the downside.
Here's what a number of economists had to say about the report, based on notes and emails sent to Yahoo Finance:
"Even though the 0.7% rise in headline retail sales in August was much better than expected, the details were far less positive, with big downward revisions to previous months, while the rise in online and grocery store spending, which contrasts with stagnant spending at bars and restaurants, suggesting that Delta fears are playing a key role." – Michael Pearce, Capital Economics
"Quarter-to-date, momentum in retail sales has slowed sharply and the control component, which is important for GDP calculations, has also decelerated. Support from household spending to GDP growth will diminish in Q3. There is substantial uncertainty surrounding outcomes going forward; on the one side, risks from the virus and cautious consumer attitudes are potential headwinds. But an improving health backdrop and faster job growth could provide a lift later this year." – Rubeela Farooqi, High Frequency Economics
"The bottom line here is that this report suggests Delta fears aren’t stopping people spending some of their abundant cash resources on goods, even as they retreat from services. These data will trigger a wave of upgrades to forecasts for Q3 consumption and GDP growth, though a sharp slowdown from Q2’s stimulus-fueled pace is a done deal. Still, upside surprises on this scale don’t come often, and this one indicates a real degree of resilience on the part of consumers." – Ian Shepherdson, Pantheon Macroeconomics
11:00 a.m. ET: Stocks test downside
With the surprise jump in U.S. retail sales providing only a fleeting boost, Wall Street has taken a decisive leg lower, with the Dow sinking by over 200 points. Some economists point to the fact that July's retail figures were revised lower, suggesting the economy is slowly losing momentum.
9:30 a.m. ET: Stocks open mixed after data
Here's where major benchmarks were trading at the open bell:
S&P 500 (^GSPC): 4,476.62, -4.08 (-0.09%)
Dow (^DJI): 34,875.73, +61.34 (+0.18%)
Nasdaq (^IXIC): 15,113.32, -48.21 (-0.32%)
Crude (CL=F): $72.41 per barrel, -$0.20 (-0.28%)
Gold (GC=F): $1,756.50, -$38.30 (-2.13%)
10-year Treasury (^TNX): +3.7 bps to yield 1.341%
8:35 a.m. ET: Retail sales unexpectedly rose in August, jobless claims hold near March 2020 low
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.
7:34 a.m. ET: Thursday: Stock futures dip ahead of retail sales, jobless claims
Here's where markets were trading Thursday morning:
S&P 500 futures (ES=F): -4.75 points (-0.11%) at 4,477.00
Dow futures (YM=F): -9 points (-0.03%) to 34,810.00
Nasdaq futures (NQ=F): -29.00 points (-0.19%) to 15,475.00
Crude (CL=F): -$0.14 (-0.19%) to $72.47 a barrel
Gold (GC=F): -$17.00 (-0.95%) to $1,777.80 per ounce
10-year Treasury (^TNX): +1.2 bps to yield 1.136%
6:10 p.m. ET Wednesday: Stock futures open higher
Here were the main moves in markets as of Wednesday evening:
S&P 500 futures (ES=F): +4 points (+0.09%) at 4,485.75
Dow futures (YM=F): +23 points (+0.07%) to 34,842.00
Nasdaq futures (NQ=F): +9.25 points (+0.06%) to 15,413.25
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck