Stocks struggle amid weak economic reports

Stocks struggled Friday as traders parsed weaker-than-expected economic data.

While the Dow was down 5 points, and the S&P 500 traded 0.15 percent lower, with consumer staples leading decliners. The Nasdaq underperformed, falling 0.3 percent.

“Overall, I think this is some of the initial optimism that drove the market higher cooling,” said Mark Luschini, a chief investment strategist at Janney Montgomery Scott.

Housing starts fell 5.5 percent in May. Economists polled by Reuters expected a rise of 3.5 percent.

“Although the series can swing around a bit and still clings to its upward trend line that began at the nadir of the financial crisis, today’s release adds to a growing pile of objective macro reports that have disappointed investors,” said Jeremy Klein, chief market strategist at FBN Securities.

The preliminary read on consumer sentiment for June also missed expectations, hitting 94.5.

Housing starts and consumer sentiment are the latest data to disappoint investors and economists. Earlier this week, the Labor Department said the consumer price index — a key measure of inflation — fell 0.1 percent last month. Economists polled by Reuters expected a rise of 0.2 percent.

Meanwhile, the Commerce Department said Wednesday that retail sales fell 0.3 percent in May, marking the largest one-month decline since January of last year. The sudden drop confounded economists, which had forecast a 0.1 percent gain.

Overall, U.S. economic growth slowed in the first quarter, with GDP increasing at a 1.2 percent annual rate. GDP grew at a 2.1 percent in the last quarter of 2016.

Concerns regarding the disappointing economic data come against a backdrop of hawkish monetary policy from the Federal Reserve. On Wednesday, the U.S. central bank raised rates for the second time this year and also laid out a plan to unwind its $4.5 trillion balance sheet.

Still, the three major indexes were little changed for the week. Entering Friday’s session, the Nasdaq was the only one on track for a weekly loss as large-cap tech stocks have faced selling pressure.

“The market is still overly concerned with some of the growth areas and the fact that the Fed is planning to raise rates further,” said Robert Pavlik, chief market strategist at Boston Private Wealth.

In corporate news, Amazon (AMZN) announced it was buying Whole Foods for $13.7 billion, or $42 a share. Shares of Kroger, Costco, Target, SuperValu, Sprouts Farmers Markets and Wal-Mart all dropped on the news.

Fred Imbert

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