Market Perspective for May 12. 2017

The S&P 500 Index breached 2400 for the first time early in the week and finished slightly lower on Friday at 2390.90.  The Nasdaq had a slight gain of 0.09 percent while, the Dow Jones Industrial Average lost 0.11 percent.  For the week, the S&P 500 and Dow Jones Industrial Average lost 0.50 and 0.40 percent, respectively.  The Nasdaq had a small gain of 0.30 percent.

Retail sales increased 0.4 percent in April, 0.3 percent ex-autos. Gasoline sales climbed 12.3 percent versus last year. Non-store retail sales are up 10.7 percent in 2017, while department store sales are down 5.2 percent. Retail earnings and share prices reflect this dichotomy. Shares of Macy’s (M) tumbled 17 percent on Thursday to a new multi-year low after the firm reported a larger-than-expected decline in same-store sales. The news battered other department store shares. On Friday, J.C. Penney (JCP) fell more than 10 percent, to its lowest point since 1988, after it too missed on sales.

Dillard’s (DDS), Kohl’s (KSS), and Nordstrom (JWN) all suffered sizable losses as well. SPDR S&P Retail (XRT) fell more than 2 percent on the week. Amazon (AMZN) shares hit a new all-time high this week. Shares of Priceline (PCLN) fell 4.5 percent after it missed sales estimates and guided analysts lower on second-quarter earnings.

Consumer prices increased 0.2 percent in April, due partially to higher energy prices. Core CPI increased 0.1 percent. Producer prices rose 0.5 percent versus an expected 0.2 percent increase. Inflation reports increased the expectations for a June rate hike, but failed to spark an interest rate rally. The 10-year Treasury yield finished the week flat at 2.3 percent.

Consumer sentiment increased in May, according to the University of Michigan Survey. Its index hit 97.7, ahead of expectations of 97. Shares of Fidelity Select Leisure (FDLSX) hit a new all-time high this week as the consumer discretionary sector moved higher.

Disney’s (DIS) ESPN division weighed on its shares this week. Snap (SNAP), maker of the Snapchat app, fell 20 percent after the company reported a higher-than-expected cash burn rate. Nvidia (NVDA) shares gained more than 20 percent on the week after an 18 percent earnings beat, lifting the technology sector and the Nasdaq to new all-time highs. Shares of iShares Semiconductors (SOXX) and Fidelity Select Semiconductors (FSELX) also hit new all-time highs. Technology outperformed all other sectors on the week.

Energy rebounded from the prior week’s losses. West Texas Intermediate crude climbed as high as $48 a barrel after a larger-than-expected decline in inventory. Rising shale production in the U.S. remains a concern for the market, however.  OPEC raised its 2017 growth estimate of U.S. oil production to 6 percent, fastest in the world among major non-OPEC producers. The U.S. accounts for 86 percent of non-OPEC production growth in 2017.

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