[BRIEFING.COM] The S&P 500 advanced 0.6% on Wednesday, overcoming a lower start that was attributed to concerns about slowing growth. The market, though, has shown a propensity to bounce on any positive-sounding trade headline, and today was no different.
The Dow Jones Industrial Average (+0.5%) and the Nasdaq Composite (+1.1%), like the S&P 500, were each down as much as 0.7% intraday before rallying. The Russell 2000 increased 0.3% after being down as much as 0.9%.
Stocks climbed into positive territory, and extended gains, after reports indicated that President Trump is expected to delay a decision on auto tariffs by up to six months. Treasury Secretary Steven Mnuchin also said that the U.S. is close to resolving a dispute with Canada and Mexico pertaining to tariffs on aluminum and steel.
These developments helped assuage investors that the U.S. would not be distracted in its trade talks with China by also having to deal with other tariff disputes. The U.S. could return to Beijing as soon as next week to continue talks, but shortly thereafter is more likely, according to sources from The Wall Street Journal.
The S&P 500 communication services (+2.1%), information technology (+1.0%), consumer staples (+0.8%), and consumer discretionary (+0.8%) sectors outperformed the broader market. The financials (-0.5%), materials (-0.2%), and utilities (-0.1%) sectors were the lone groups to finish lower.
Shares of Ford Motor (F 10.36, +0.12, +1.2%) and General Motors (GM 37.37, +0.33, +0.9%) reacted positively to the possible delay in auto tariffs. Semiconductor stocks also outperformed, evident by the 0.8% gain in the Philadelphia Semiconductor Index, although the group had been up as much as 1.5% intraday.
These results were still a nice turnaround for a market that began the day fretting over slower economic growth. The U.S. and China released weaker-than-expected figures for retail sales and industrial production for April. Specifically, U.S. retail sales declined 0.2% (Briefing.com consensus +0.2%), and industrial production declined 0.5% (Briefing.com consensus +0.1%).
The data underpinned the buying interest in U.S. Treasuries, which only tapered off slightly during the rally in equities. The 2-yr yield and the 10-yr yield declined four basis points each to 2.16% and 2.38%, respectively. The U.S. Dollar Index increased 0.1% to 97.58. WTI crude increased 0.4% to $62.06/bbl.
Reviewing Wednesday's economic reports:
- Total retail sales declined 0.2% (Briefing.com consensus +0.2%) after increasing an upwardly revised 1.7% (from 1.6%) in March. Excluding autos, retail sales rose just 0.1% in April (Briefing.com consensus +0.6) following an upwardly revised 1.3% increase (from 1.2%) in March.
- The key takeaway from the report is that consumers curtailed discretionary spending on goods in April in a way that will temper the outlook for Q2 GDP growth.
- Industrial production declined 0.5% in April (Briefing.com consensus +0.1%) following an upwardly revised 0.2% increase (from -0.1%) in March. Total capacity utilization fell to 77.9% (Briefing.com consensus 78.8%) from a downwardly revised 78.5% (from 78.8%) in March.
- The key takeaway from the report is the understanding that it marked the fourth straight month in which there was no growth in manufacturing output.
- Business inventories were unchanged in March, as expected, following an unrevised 0.3% increase in February. Business sales increased 1.6% on the heels of an upwardly revised 0.2% increase (from 0.1%) in February.
- The key takeaway from the report is that the inventory growth on a yr/yr basis (+5.0%) continues to outpace sales growth (+3.7%), which should keep price pressures in check.
- The weekly MBA Mortgage Application Index declined 0.6% following a 2.7% increase in the prior week.
- The Empire State Manufacturing Survey for May increased to 17.8 (Briefing.com consensus 7.7) from the prior month's reading of 10.1.
- The NAHB Housing Market Index increased to 66 (Briefing.com consensus 64) from 63 in April.
Looking ahead, investors will receive Housing Starts and Building Permits for April, the weekly Initial and Continuing Claims report, and the Philadelphia Fed Index for May on Thursday.
- Nasdaq Composite +17.9% YTD
- Russell 2000 +14.8% YTD
- S&P 500 +13.7% YTD
- Dow Jones Industrial Average +10.0% YTD