U.S. stocks gave back some of yesterday gains as retail sales posted their first decline since February. However, the report was only a slight disappointment as August’s figures were revised higher and the yearly trend remains intact.
3Q earning continued to pour in with Bank of America and Bank of New York Mellon besting the Street’s forecasts. Treasury yields were lower and took the U.S. dollar with them. Crude oil and gold were higher on the day.
The Dow Jones Industrial Average was down 22 points (0.1%) at 27,003
The S&P 500 Index dropped 6 points (0.2%) to 2,990
The Nasdaq Composite shed 25 points (0.3%) to 8,149
In light volume, 741 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq
WTI crude oil ticked $0.55 higher to $53.36 per barrel and wholesale gasoline was flat at $1.62 per gallon
The Bloomberg gold spot price increased $10.20 to $1,493.70 per ounce
The Dollar Index—a comparison of the U.S. dollar to six major world currencies—was down 0.3% to 98.00
Retail sales slip monthly, homebuilder sentiment improves, mortgage apps notch another gain
Advance retail sales for September fell 0.3% month-over-month, versus the Bloomberg forecast of a 0.3% increase, and August’s 0.4% rise was upwardly-revised to a 0.6% gain. Last month’s sales ex-autos ticked 0.1% lower m/m, compared to expectations of a 0.2% gain and August’s upwardly-revised 0.2% increase. Sales ex-autos and gas were flat m/m, compared to estimates of a 0.2% gain, and August’s upwardly-adjusted 0.3% increase. The control group, a figure used to calculate GDP, was unchanged, versus projections of a 0.3% rise, and compared to August’s unrevised 0.3% increase.
This was the first month the measure posted a decline since February, as seven of the 13 categories registered decreases, including autos, building materials, and non-store retailers, which counts online activity, offsetting increases in apparel, health and personal care, as well as furniture and home furnishings. However, sales were up 4.1% on a year-over year (y/y) basis, continuing its upward trend, with the revisions to August’s figures lending a hand.
The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment in October improved to 71 from September’s unrevised 68 level, where it was expected to remain, with a level of 50 separating good and poor conditions. This was the ninth-straight month the index has been north of 60 and its highest level since February 2018. The NAHB noted that, “The second half of 2019 has seen steady gains in single-family construction, and this is mirrored by the gradual uptick in builder sentiment over the past few months,” adding, “However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.”
The Federal Reserve released its Beige Book—an anecdotal look at economic activity across the nation used as a tool for its next monetary policy meeting set to conclude on October 30. In the report, economists said that the U.S. economy has expanded a “slight to modest pace”. Business outlooks for the next six to twelve months were a bit soft, but household spending has been strong.
Treasuries were higher, with the yield on the 2-year note down 3 bps to 1.59%, the yield on the 10-year note ticking 3 bps lower to 1.75%, while the 30-year bond rate was 1 bp higher at 2.23%. Despite the increases last week, yields remain historically low and overseas there is a massive amount of negative yielding debt.
With this week’s economic calendar less robust, Q3 earnings season could grab top billing, as it is set to kick into gear after a number of financial institutions unofficially got the ball rolling yesterday. Global events may also be the catalysts to help to shape sentiment throughout the week as any Brexit developments may be scrutinized as the deadline draws near, as well as the continued focus on the U.S.-China trade front. While optimism spiked on the partial trade deal agreed to between the two world’s largest economics, headlines since have kept a lid on the euphoria, as today China vowed to retaliate if the U.S. Congress were to enact legislation that supported the protests in Hong Kong. The proposed bill would request that various government departments consider whether recent political developments in Hong Kong require the U.S. to change the region’s special trading status.
Europe finished mixed amid Brexit uneasiness, Asia mostly higher
Brexit negotiations continued well into the night without an agreement, with reports coming out of the meeting more downbeat amid heightened pessimism after the Democratic Unionist Party objected to U.K. Prime Minister Boris Johnson’s proposal.
Economic reports from Europe showed consumer price inflation out of Italy, the Eurozone and U.K. roughly matched expectations, while wholesale prices in the latter declined more than forecasts. Eurozone industrial orders came in well below projections. The euro and the British pound were higher versus the U.S. dollar, while bond yields in the region were mostly higher.
Stocks in Asia finished mostly higher with focus again on developments on the U.S.-China trade front, and as the People’s Bank of China unexpectedly injected $28 billion in liquidity through one-year medium-term lending facility loans. The move caught investors by surprise, as the government typically injects funds when prior loans come due. Despite the positive events, China’s Shanghai Composite Index declined. Bloomberg reported that China vowed to retaliate if the U.S. Congress were to follow through on ratifying legislation that would require an annual review of the sufficiency of autonomy in Hong Kong from Beijing to justify its special trading status.
The Hong Kong Hang Seng Index was higher, and South Korea’s Kospi Index increased on the day with the Bank of Korea cutting its benchmark interest rate by 25 bps, as was widely expected. Japan’s Nikkei 225 Index increased was nicely higher, as well as Australia’s S&P/ASX 200 Index. India’s S&P BSE Sensex Index ticked a bit higher.
Bank of America Inc. reported Q3 earnings-per-share (EPS) of $0.56, or $0.75 per share excluding a $2.1 billion impairment charge attached to the end of a partnership with First Data, above the $0.51 FactSet estimate. Revenues were nearly flat year-over-year (y/y) at $23.0 billion, slightly above the $22.8 billion forecast.
Bank of New York Mellon posted a Q3 profit of $1.07 per share, versus the $0.99 FactSet estimate, as revenues fell 5.0% y/y to $3.86 billion and below the $3.91 billion forecast.