Stock Market Update

[BRIEFING.COM] The stock market exhibited mixed action today. The market started the session with losses at the index level, but the Dow Jones Industrial Average (+0.7%) and the S&P 500 (+0.4%) closed with gains. 

There was an emerging view that stocks are due for a period of consolidation after a big run (the S&P 500 is up 6.3% in May), but that still hasn't materialized in a meaningful way. The continued resilience seen this morning acted as its own upside catalyst as the session progressed. 

The drop in market rates also contributed to the underlying positive bias. The 10-yr yield settled seven basis points lower at 4.46%, and the 2-yr yield settled eight basis points lower at 3.97%. This price action was driven in part by a cool Producer Price Index report for April (-0.5%; Briefing.com consensus 0.3%). It was just one report, though, on an economic data-heavy day. 

The calendar also included April reports for retail sales, and industrial production; weekly initial and continuing jobless claims; and May reports for the Philadelphia Fed Index, Empire State Manufacturing Survey, and NAHB Housing Market Index that, collectively, were mixed relative to expectations.

The Nasdaq Composite (-0.2%) lagged its peers through the entire session, reflecting pressure from losses in some mega caps. 

Dow component UnitedHealth (UNH 274.35, -33.66, -10.9%) was another notable laggard following a Wall Street Journal report that the DOJ is investigating the company for possible criminal Medicare fraud. UNH said it has not been informed of any such investigation.

Walmart (WMT 96.35, -0.48, -0.5%) was also in the headlines after it topped the quarterly consensus EPS estimate, yet its FY26 EPS guidance was conservative-looking relative to the consensus estimate, and the company warned that consumers are likely to see higher prices starting later this month and certainly in June due to the tariffs.

• S&P 500: +0.6% YTD
• Dow Jones Industrial Average: -0.5% YTD
• Nasdaq Composite: -1.0% YTD
• S&P Midcap 400: -2.1% YTD
• Russell 2000: -6.1% YTD

Reviewing today's economic data:

• The Producer Price Index for final demand decreased 0.5% month-over month in April (Briefing.com consensus 0.3%). That was the good news. The bad news is that the prior month was revised up to unchanged from a 0.4% decline. The Producer Price Index for final demand, less foods and energy, decreased 0.4% month-over-month (Briefing.com consensus 0.3%), again good news, but the bad news (again) is that the prior month was revised up to 0.4% from -0.1%. On a year-over-year basis, the index for final demand was up 2.4%, versus an upwardly revised 3.4% (from 2.7%) in March, while the index for final demand, less foods and energy, was up 3.1%, versus an upwardly revised 4.0% (from 3.3%) in March.
  • The key takeaway from the report is that the big drop in the index for final demand was driven by a 0.7% decline in the index for final demand services (the largest decline since December 2009). Over 40% of that 0.7% decline was driven by margins for machinery and vehicle wholesaling, which dropped 6.1%. That suggests wholesalers were likely absorbing some tariff impacts, which is good for the end customer but not necessarily for earnings.
    
• Total retail sales increased 0.1% month-over-month in April (Briefing.com consensus 0.2%) following an upwardly revised 1.7% (from 1.4%) in March. Excluding autos, retail sales were also up 0.1% month-over-month (Briefing.com consensus 0.5%) following an upwardly revised 0.8% increase (from 0.5%) in March.
  • The key takeaway from the report is that the pace of spending on goods decelerated in April, speaking to the tariff frontrunning evident in the strong sales for March and reflecting the consumer's cautious mindset following "Liberation Day" and the stock market's volatility.
• Initial jobless claims for the week ending May 10 were unchanged at 229,000 (Briefing.com consensus 226,000), while continuing jobless claims for the week ending May 3 increased by 9,000 to 1.881 million.
  • The key takeaway from the report is that the initial jobless claims filings -- a leading indicator -- still reflect an otherwise solid labor market that will remain supportive of consumer spending, albeit perhaps at a slower pace in the face of higher prices.
• The May Empire State Manufacturing Index checked in at -9.2 (Briefing.com consensus 1.0) versus -8.1 in April. The May Philadelphia Fed Index checked in at -4.0 (Briefing.com consensus -6.0) versus -26.4 in March.
  • The key takeaway from these regional manufacturing reports is that the breakeven point between contraction and expansion is 0.0, so each reflects a contraction in activity in May versus April, somewhat faster for the Empire State report and somewhat slower for the Philadelphia Fed Index.
• Total industrial production was flat month-over-month in April (Briefing.com consensus 0.3%) following an unrevised 0.3% decline in March. The capacity utilization rate dipped to 77.7% (Briefing.com consensus 77.9%) from an unrevised 77.8% in March. Total industrial production increased 1.5% yr/yr while the capacity utilization rate was 1.9 percentage points below its long-run average.
  • The key takeaway from the report is that manufacturing output was weak. Excluding motor vehicles and parts, manufacturing output still decreased 0.3%, presumably with the tariff uncertainty holding back total output.

Looking ahead to Friday, market participants receive the following economic data:

• 8:30 ET: April Housing Starts (Briefing.com consensus 1.383 mln; prior 1.324 mln) and Building Permits (Briefing.com consensus 1.450 mln; prior 1.481 mln), April Import Prices (prior -0.1%), Import Prices ex-oil (prior 0.1%), Export Prices (prior 0.0%), and Export Prices ex-agriculture (prior -0.1%)
• 10:00 ET: Preliminary May University of Michigan Consumer Sentiment (Briefing.com consensus 55.0; prior 52.2)
• 16:00 ET: March net Long-Term TIC Flows (prior $112.0 bln)