EmailDespite broad market weakness on Monday, Groupon (GRPN 11.58, -0.83) soared ahead of its quarterly report then extended its move into Tuesday on the back of better-than-expected bottom line results.
Sentiment on Tuesday soured as financial media discussed the outflow of deposits among Greece's banks. That theme overshadowed news that Germany’s GDP grew at a stronger-than-expected clip during the first quarter.
Domestic data did little to support the case for buying as both total retail sales and retail sales less autos increased during April by 0.1%, which is half of what had been widely expected. On par with what had been projected, overall CPI was flat from the prior month, while core CPI increased by 0.2%.
However, the Empire State Manufacturing Index for May improved to 17.1 from 6.6 in the prior month to exceed the 8.4 that many economists had expected.
Better-than-expected earnings from both Home Depot (HD 47.05, +0.03) and TJX Co's (TJX 40.06, -0.88) were in the mix, but neither influenced broad market action.
By midweek stocks were trying to trade higher, but sellers continued to show their control.
At an annualized rate of 715,000, building permits were generally on par with what had been expected, but news that housing starts in April improved more than expected to an annualized rate of 717,000 from an upwardly revised rate of 699,000 in the prior month helped set a positive tone. Industrial production also proved impressive by increasing in April by 1.1%, which is more than double the 0.5% increase that had been broadly expected.
Select retailers were in focus on Wednesday as JC Penney (JCP 26.29, +0.35), Abercrombie & Fitch (ANF 26.29, +0.35), and Target (TGT 55.46, +0.65) reported earnings results. Shares of the two former stocks fell precipitously. Deere (DE 73.19, +0.22) was out with its latest quarterly report, which featured a better-than-expected bottom line, but the stock also suffered a negative response.
Minutes from the most recent FOMC meeting failed to offer any new insight into the mindset of monetary policy makers. They did note that even though bank credit slowed in March, it still expanded at a solid pace for the first quarter. Increased financial strains within the euro area were also noted.
Europe remained on the minds of market participants on Thursday as Greece's long-term rating was cut to CCC from B- by analysts at Fitch in response to heightened risk that the country will exit the euro.
Data ranged from unsurprising to disappointing as the latest initial jobless claims tally of 370,000 was unchanged from the prior week and on par with what had been widely expected. Meanwhile, the Philadelphia Fed Index for May fell to -5.8 from 8.5 in the prior month when an improvement to 8.8 had been anticipated. Leading Indicators also surprised to the downside by declining 0.1% in the face of calls for a 0.2% increase.
Sears Holding (SHLD 52.23, -0.19) announced a spin-off of Sears Canada alongside its latest quarterly results, pleasing investors who have called for a strategic overhaul. Retail giant Walmart (WMT 62.43, +0.75) posted a strong report.
Continued weakness among stocks resulted in further rotation into Treasuries. Shortly after the close on Thursday the yield on the 10-year Note set a new record low narrowly beneath 1.70%.
On Thursday the Volatility Index climbed above 24 for the first time in 2012. It eased back on Friday, but remains up more than 60% from the lows that it set less than two months ago.
The S&P 500 fell more than 4% this week – its worst weekly performance since November. Moreover, the broad market measure is now below 1300 for the first time since January.
Action this week finished on a weak note as stocks spent the first half of Friday chopping along the neutral line before descending into the close. Stocks have logged losses in 11 of the last 13 sessions.
Natural resource plays attempted to offer support, but neither Materials nor Energy could fully sustain gains. Both had been up more than 1% at their session highs, but settled the session with losses of 0.5% and 0.7%, respectively.
Strength in natural gas and precious metals helped the CRB Commodity Index muster a 0.3% gain. Despite four straight advances for the CRB, it still suffered a third straight weekly loss, the latest of which was 0.5%.
Crude oil continued to encounter selling. The energy component fell to $91.08 per barrel for a new 2012 low, but settled pit trade on Friday at $91.51 per barrel for a loss of little more than 1%. Prices in the constant futures contract are now down about 17% from their February high.
The slide in oil has been made easier by an advancing dollar, which climbed another 1.1% this week against a basket of major foreign currencies. Last night it moved up to its best level since 2010, but a drift lower left it to suffer a slight loss on Friday.
Most of the greenback’s gains have come against the euro, which managed to put together a gain of about 0.6% on Friday, but it continues to contend with concerns about shaky fiscal, financial, and economic conditions in the eurozone, highlighted at the end of the week by a series of downgrades for several of Spain’s banks. Even the political climate has become increasingly precarious.
The pace of quarterly earnings reports has slowed in recent weeks, but on Friday Gap (GPS 25.71, -0.60), Applied Materials (AMAT 10.36, -0.12), Intuit (INTU 54.51, +0.10), and Marvell (MRVL 12.76, -0.55) all posted upside earnings surprises. Their announcements were overshadowed amid the frenzy that surrounded the debut of social website Facebook (FB 38.37, +0.37).
The expiration of monthly options drove share volume on the NYSE well above recent daily averages.
