Retail Sales Fall, Sending Stocks Down

(Credit: Bryan Mitchell/AP Photo)

Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.

Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers’ ability to spend.  Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.

This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.

There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more.  Spending on furniture also rose, the result of an improving housing market.

On the whole, today’s report doesn’t bode well for the economy.  As economist Joel Naroff explained it in a note, “first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession.”

The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.

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US stocks open lower, dragged down by tech

NEW YORK (AP) — Stocks are getting off to a weak start on Wall Street after more weakness in technology companies.

The early decline Friday is putting the market on track for its first weekly loss this month.

The Dow Jones industrial average fell 75 points, or 0.5 percent, to 15,481 in the first few minutes of trading.

The Standard & Poor's 500 index fell six points, or 0.4 percent, to 1,683. The Nasdaq composite fell 13 points, or 0.4 percent, to 3,592.

Amazon fell 1 percent to $300.60 after reporting a surprise loss late Thursday.

Expedia plunged 27 percent to $47.62 after the online travel agency reported that second-quarter profit fell by one-third and badly missed Wall Street expectations.

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Wall St. Week Ahead: Stocks face the Fed, jobs and earnings

Traders work on the floor of the New York Stock Exchange, July 26, 2013.

Credit: Reuters/Brendan McDermid

By Caroline Valetkevitch

NEW YORK | Fri Jul 26, 2013 7:18pm EDT

NEW YORK (Reuters) - The coming week on Wall Street could be a summer blockbuster, with the marquee featuring a triple bill: the Fed, jobs and earnings.

Of the three, the Federal Reserve has the most potential to upset the market. The Federal Open Market Committee is expected to release a statement on Wednesday after a two-day meeting.

Fed Chairman Ben Bernanke jolted markets in late May by saying the U.S. central bank planned to ease back on its stimulus efforts once the economy improves. Investors have been glued to his every comment since then.

"The Fed can easily either scare investors or encourage investors without having to say very much," said Bryant Evans, portfolio manager at Cozad Asset Management in Champaign, Illinois.

It "tends to create the biggest knee-jerk reactions out of the market."

As part of its quantitative easing policy, the Fed has been buying Treasury debt and other bonds each month to keep interest rates low and promote growth.

Stocks have rallied for most of this year, with both the Dow and the Standard & Poor's 500 hitting record highs, partly because of the Fed's stimulus efforts.

The market slid after Bernanke's comments on May 22, with the S&P 500 dropping nearly 6 percent in the month that followed.

But remarks from Bernanke and other Fed officials since then have calmed the market and erased those declines.

Bernanke reassured markets last week, saying the timeline for winding down the U.S. central bank's stimulus program was not set in stone.

The S&P 500 is up 18.6 percent for the year so far.

Trading has been more subdued this week, with more focus on earnings. The S&P 500 ended the week with just a slight loss of 0.03 percent, breaking its four-week winning streak.

While some analysts said the CBOE Volatility Index .VIX did not appear to be pricing in a lot of volatility for next week, there could still be a shift in sentiment. On Friday, the VIX fell 1.9 percent to end at 12.72.

"I do expect to see an increase in volatility next week, but that increase is coming after a week of very quiet trading," said WhatsTrading.com options strategist Frederic Ruffy in Chicago.

Some market attention has also shifted to speculation over possible successors to Bernanke, though a senior White House official said on Friday that no announcement is imminent. President Barack Obama has signaled that Bernanke is likely to step down when his second four-year term as Fed chairman ends January 31. Former U.S. Treasury Secretary Lawrence Summers and current Fed Vice Chair Janet Yellen are among names cited.

IT'S ALL ABOUT JOBS

Friday will bring the Labor Department's July employment report.

The job market's recovery is seen as key to the future of Fed policy. The Fed has said it will keep interest rates at historic lows, where they've been for more than four years, until the U.S. unemployment rate drops to 6.5 percent.

Employers are expected to have added 185,000 jobs to their payrolls in June, according to economists polled by Reuters. That's slightly below June's count of 195,000 new positions.

The U.S. unemployment rate is expected to dip to 7.5 percent in July from 7.6 percent in June.

"July historically has been all over the place, in terms of employment. Factories often times do shutdowns in July, and there's turnover in agriculture," Evans said.

Analysts have worried that big gains in jobs numbers could prompt an early end to the Fed's bond buying, but stocks rose sharply earlier this month when June's payrolls far exceeded expectations.

While the jobs report is expected to be the biggest piece of economic news next week, the economic calendar includes data on gross domestic product and the Chicago Fed Midwest Manufacturing Index for June. The Institute for Supply Management's U.S. manufacturing index for July and monthly car sales will also be part of the mix.

EARNINGS SEASON'S SECOND HALF

With results already in from 259 of the S&P 500, the season has entered its second half.

But next week will still be one of the heaviest of the season, with 131 names from a wide range of industries due to report, including Time Warner Cable (TWC.N), Chevron (CVX.N), Coach (COH.N), U.S. Steel (X.N) and Allstate (ALL.N).

Stronger-than-expected results since the start of the season have pushed up the growth estimate for the quarter. Second-quarter earnings are now expected to have increased 4.1 percent, up from an estimate of 2.8 percent a week ago, Thomson Reuters data showed.

Revenue growth, at 1.6 percent as of Friday, has not been strong, but 56 percent of companies so far are beating expectations, above the 48 percent average of the last four quarters.

We are at all-time highs in a lot of these names, and I think this earnings season is supporting that," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management, which has about $13 billion in assets.

But she said that also means the market may be "vulnerable to some profit-taking."

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel; Editing by Jan Paschal)

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Wall St. Week Ahead: Stocks face the Fed, jobs and earnings

Traders work on the floor of the New York Stock Exchange, July 26, 2013.

Credit: Reuters/Brendan McDermid

By Caroline Valetkevitch

NEW YORK | Fri Jul 26, 2013 7:18pm EDT

NEW YORK (Reuters) - The coming week on Wall Street could be a summer blockbuster, with the marquee featuring a triple bill: the Fed, jobs and earnings.

Of the three, the Federal Reserve has the most potential to upset the market. The Federal Open Market Committee is expected to release a statement on Wednesday after a two-day meeting.

Fed Chairman Ben Bernanke jolted markets in late May by saying the U.S. central bank planned to ease back on its stimulus efforts once the economy improves. Investors have been glued to his every comment since then.

"The Fed can easily either scare investors or encourage investors without having to say very much," said Bryant Evans, portfolio manager at Cozad Asset Management in Champaign, Illinois.

It "tends to create the biggest knee-jerk reactions out of the market."

As part of its quantitative easing policy, the Fed has been buying Treasury debt and other bonds each month to keep interest rates low and promote growth.

Stocks have rallied for most of this year, with both the Dow and the Standard & Poor's 500 hitting record highs, partly because of the Fed's stimulus efforts.

The market slid after Bernanke's comments on May 22, with the S&P 500 dropping nearly 6 percent in the month that followed.

But remarks from Bernanke and other Fed officials since then have calmed the market and erased those declines.

Bernanke reassured markets last week, saying the timeline for winding down the U.S. central bank's stimulus program was not set in stone.

The S&P 500 is up 18.6 percent for the year so far.

Trading has been more subdued this week, with more focus on earnings. The S&P 500 ended the week with just a slight loss of 0.03 percent, breaking its four-week winning streak.

While some analysts said the CBOE Volatility Index .VIX did not appear to be pricing in a lot of volatility for next week, there could still be a shift in sentiment. On Friday, the VIX fell 1.9 percent to end at 12.72.

"I do expect to see an increase in volatility next week, but that increase is coming after a week of very quiet trading," said WhatsTrading.com options strategist Frederic Ruffy in Chicago.

Some market attention has also shifted to speculation over possible successors to Bernanke, though a senior White House official said on Friday that no announcement is imminent. President Barack Obama has signaled that Bernanke is likely to step down when his second four-year term as Fed chairman ends January 31. Former U.S. Treasury Secretary Lawrence Summers and current Fed Vice Chair Janet Yellen are among names cited.

IT'S ALL ABOUT JOBS

Friday will bring the Labor Department's July employment report.

The job market's recovery is seen as key to the future of Fed policy. The Fed has said it will keep interest rates at historic lows, where they've been for more than four years, until the U.S. unemployment rate drops to 6.5 percent.

Employers are expected to have added 185,000 jobs to their payrolls in June, according to economists polled by Reuters. That's slightly below June's count of 195,000 new positions.

The U.S. unemployment rate is expected to dip to 7.5 percent in July from 7.6 percent in June.

"July historically has been all over the place, in terms of employment. Factories often times do shutdowns in July, and there's turnover in agriculture," Evans said.

Analysts have worried that big gains in jobs numbers could prompt an early end to the Fed's bond buying, but stocks rose sharply earlier this month when June's payrolls far exceeded expectations.

While the jobs report is expected to be the biggest piece of economic news next week, the economic calendar includes data on gross domestic product and the Chicago Fed Midwest Manufacturing Index for June. The Institute for Supply Management's U.S. manufacturing index for July and monthly car sales will also be part of the mix.

EARNINGS SEASON'S SECOND HALF

With results already in from 259 of the S&P 500, the season has entered its second half.

But next week will still be one of the heaviest of the season, with 131 names from a wide range of industries due to report, including Time Warner Cable (TWC.N), Chevron (CVX.N), Coach (COH.N), U.S. Steel (X.N) and Allstate (ALL.N).

Stronger-than-expected results since the start of the season have pushed up the growth estimate for the quarter. Second-quarter earnings are now expected to have increased 4.1 percent, up from an estimate of 2.8 percent a week ago, Thomson Reuters data showed.

Revenue growth, at 1.6 percent as of Friday, has not been strong, but 56 percent of companies so far are beating expectations, above the 48 percent average of the last four quarters.

We are at all-time highs in a lot of these names, and I think this earnings season is supporting that," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management, which has about $13 billion in assets.

But she said that also means the market may be "vulnerable to some profit-taking."

(Wall St Week Ahead runs every Friday. Questions or comments on this column can be emailed to: caroline.valetkevitch(at)thomsonreuters.com)

(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel; Editing by Jan Paschal)

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Stocks eke out tiny gains on Wall Street

NEW YORK (AP) — A mixed batch of earnings results gave investors little direction on Friday as traders began looking ahead to a packed schedule next week.

The stock market slumped in early trading, climbed steadily the rest of the day, then ended little changed.

Volume was thin as traders prepared for a deluge of potentially market-moving events next week: a Federal Reserve meeting, the government's monthly employment report and much more.

"Traders seem to be erring on the side of caution today," said Jeffrey Kleintop, the chief market strategist for LPL Financial.

Expedia plunged 27 percent, the worst fall in the Standard & Poor's 500 index. The online travel agency reported earnings late Thursday that badly missed analysts' expectations. Higher costs were the main culprit. Expedia lost $17.80 to $47.20.

The Standard & Poor's 500 index inched up 1.40 points, or 0.08 percent, to 1,691.65. The index ended the week with a tiny loss, the first this month.

The Dow Jones industrial average rose 3.22 points, less than 0.1 percent, to 15,558.83. The Nasdaq composite index edged up 7.98 points, or 0.2 percent, to 3,613.16.

It's halftime in the second-quarter earnings season, and corporate profits are shaping up better than some had feared.

Analysts forecast that earnings for companies in the S&P 500 increased 4.5 percent over the same period in 2012, according to S&P Capital IQ. At the start of July, they predicted earnings would rise 2.8 percent. Nearly seven out of every 10 companies have surpassed Wall Street's profit targets.

The results aren't exactly impressive, said Sam Stovall, the chief equity strategist at S&P Capital IQ. Investors often argue that analysts set the bar for earnings so low that most companies are bound to jump over it. On average, more than six of every 10 companies beat Wall Street's targets every quarter.

Starbucks posted results late Thursday that beat analysts' estimates. Lower costs for coffee beans and better sales of salads and sandwiches helped. Starbucks jumped $5.19, or 8 percent, to $73.36.

The stock market hasn't ended the week with a loss since June 21, when speculation that the Federal Reserve would start easing off its support for the economy rattled financial markets.

Kleintop cautioned against reading too much into the market's moves on Friday or the weekly loss. The S&P 500 is still up 5.3 percent for the month and 18.6 percent for the year.

"It's just one week down after four up," he said. "If the market just goes higher and higher week after week, you would see a major swoon when it runs into some disappointing news."

In the market for U.S. government bonds, the yield on the benchmark 10-year Treasury note slipped to 2.56 percent from 2.57 percent late Thursday.

Long-term interest rates have swung in a wide range since early May as traders attempt to anticipate the Fed's next move. The yield on the 10-year note went as low as 1.63 percent on May 1 and as high as 2.74 percent on July 5.

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Retail Sales Fall, Sending Stocks Down

(Credit: Bryan Mitchell/AP Photo)

Retail sales fell by 0.4 percent in March, according to the Commerce Department, the biggest drop in nine months. The major stock market indexes slid on the news.

Taxes went up at the beginning of the year for everyone who gets a paycheck and that may finally be affecting consumers’ ability to spend.  Consumer spending, which makes up two-thirds of U.S. economic activity, is a major barometer of the strength of the economy.

This report was not entirely unexpected as the March jobs report showed a drop in retail employment. It was also a colder than usual March in much of the country and the early Easter holiday may have had an impact on spending.

There were, however, two bright spots in the report. First was a rise in spending at restaurants as Americans may have diverted some cash to eat out more.  Spending on furniture also rose, the result of an improving housing market.

On the whole, today’s report doesn’t bode well for the economy.  As economist Joel Naroff explained it in a note, “first quarter growth should be decent, but decent is not good enough nearly four years after the end of the recession.”

The Dow Jones industrial average fell 42 points to 14,822 at 11:20 a.m. ET.

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Stocks suffer as China seeks to overhaul industry

LONDON (AP) — Stocks mostly dropped Friday on concerns that a brusque overhaul of China's industry could slow down the world's second-largest economy and after retailer Amazon.com reported a surprise loss.

Beijing has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful makeover of the economy. That move followed weak manufacturing data on Wednesday.

Communist leaders are trying to reduce reliance on investment and trade. But a slowdown that pushed China's economic growth to a two-decade low of 7.5 percent last quarter had earlier prompted suggestions they might have to reverse course and stimulate the economy with more investment to reduce the threat of job losses and unrest.

China's Shanghai Composite dropped 0.5 percent to 2,010.85.

In Europe, Britain's FTSE 100 index was down 0.5 percent to 6,557.49 while Germany's DAX fell 0.7 percent to 8,243.24.

France's CAC-40 bucked the trend, rising 0.3 percent to 3,969.76. It was boosted by a 4.1 percent rise in the shares of LVMH, the luxury goods maker, after it reported higher earnings. Meanwhile, shares in French media company Vivendi were up 2.6 percent after it agreed to sell most of its majority stake in video games maker Activision.

Wall Street opened lower as shares in Amazon.com fell 1.6 percent after the company reported a loss for the second quarter. The Nasdaq, on which the company is listed, fell 0.3 percent, while the broader S&P 500 was down 0.4 percent at 1,683.88. The Dow was 0.5 percent lower at 15,482.90.

Overall, trading has been quiet in recent days as a lot of people wait for next week's meeting of the Federal Open Market Committee in the U.S. for guidance on when the central bank will start reducing its monetary stimulus.

Since late last year, the Fed has been buying $85 billion in Treasury and mortgage bonds a month — a move that has kept long-term rates near record lows and supported economic recovery.

In Asia, Japan's Nikkei 225 index fared worst on Friday, closing 3 percent lower at 14,129.98, due to a big rise in the yen, which risks making the country's exports less competitive on international markets.

Japan on Friday said consumer prices rose in June for the first time in more than a year, an early sign that the government's stimulus policies are working. While that is a promising sign in the long-term, the signs of inflation suggest interest rates could eventually increase — higher rates tend to strengthen a national currency. The dollar was down 0.9 percent against the yen, at 98.34 yen.

Elsewhere in the region, Hong Kong's Hang Seng gained 0.3 percent and Australia's S&P/ASX 200 rose 0.1 percent.

In energy trading, benchmark crude was down 54 cents at $104.95 a barrel in electronic trading on the New York Mercantile Exchange.

The euro was little changed at $1.3273 from $1.3277 late Thursday.

___

Teresa Cerojano in Manila, Philippines, contributed to this report.

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Stocks suffer as China seeks to reform industry

LONDON (AP) — Stocks mostly dropped on Friday on concerns that a brusque overhaul of China's industrial sector could cause a sharp slowdown in the world's second-largest economy.

Beijing has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful makeover of the economy. That move followed weak manufacturing data on Wednesday.

Communist leaders are trying to reduce reliance on investment and trade. But a slowdown that pushed China's economic growth to a two-decade low of 7.5 percent last quarter had earlier prompted suggestions they might have to reverse course and stimulate the economy with more investment to reduce the threat of job losses and unrest.

China's Shanghai Composite dropped 0.5 percent to 2,010.85.

Japan's Nikkei 225 index fell even further, closing 3 percent lower at 14,129.98, due to a big rise in the yen, which risks making the country's exports less competitive on international markets.

Japan on Friday said consumer prices rose in June for the first time in more than a year, an early sign Prime Minister Shinzo Abe's stimulus policies are working. While that is a promising sign in the long-term, the signs of inflation suggest interest rates could eventually also increase — higher rates tend to strengthen a national currency. The dollar was down 0.6 percent against the yen, at 98.67 yen.

In Europe, Britain's FTSE 100 index was down 0.3 percent to 6,571.71 while Germany's DAX was 0.5 percent lower at 8,258.18. France's CAC-40 bucked the trend, rising 0.4 percent to 3,973.45, thanks to a 5.7 percent rise in the shares of LVMH, the luxury goods maker, after it reported higher earnings.

Wall Street was expected to drop slightly on the open, with S&P 500 futures down 0.3 percent and Dow futures 0.2 percent lower.

Overall, trading has been quiet in recent days as a lot of people wait for next week's meeting of the Federal Open Market Committee in the U.S. for guidance on the tapering of U.S. government bond purchases, he said.

Since late last year, the U.S. Federal Reserve has been buying $85 billion in Treasury and mortgage bonds a month — a move that has kept long-term rates near record lows and supported economic recovery.

Elsewhere in the region, Australia's S&P/ASX 200 rose 0.1 percent to 5,042. Stocks in South Korea and New Zealand finished slightly higher while benchmarks in the Philippines, Malaysia, Indonesia and Taiwan fell. Hong Kong's Hang Seng was up 0.3 percent to 21,968.95

In energy trading, benchmark crude was down 75 cents at $104.74 a barrel in electronic trading on the New York Mercantile Exchange. It rose 10 cents to close at $105.49 on Thursday.

The euro was little changed at $1.3275 from $1.3277 late Thursday.

___

Teresa Cerojano in Manila, Philippines, contributed to this report.

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