Nasdaq, S&P 500 fall as growth stocks tumble

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NASDAQ, S&P 500 FALL AS GROWTH STOCKS TUMBLE (1215 EDT/1615 EDT)

The Nasdaq and the S&P 500 were down in midday trading on Thursday, with rising U.S. Treasury yields pressuring megacap growth stocks, while several Wall Street banks reported mixed earnings on the last day of a holiday-shortened week.

Twitter Inc rose after Tesla Inc CEO Elon Musk offered to buy the social media company for about $41 billion. The electric-car maker’s shares fell, however.

Five of the 11 major S&P 500 sectors slid, with technology and consumer discretionary stocks leading losses.

Megacap growth names such as Amazon.com Inc and Apple Inc fell as Treasury yields rose after data showed initial claims for state unemployment benefits were higher than expected, while the rise in retail sales showed a decline after gasoline at record-high prices is stripped out.

Declining issues outnumbered advancers for a 1.16-to-1 ratio on the NYSE and a 1.35-to-1 ratio on the Nasdaq.

The S&P index recorded 27 new 52-week highs and six new lows, while the Nasdaq recorded 49 new highs and 89 new lows.

(Gertrude Chavez-Dreyfuss)

FILL ‘ER UP: RETAIL SALES, JOBLESS CLAIMS, UMICH, ET AL (11:21 EDT/1521 GMT)

A beggar’s feast of data provided sensory overload on Thursday, ending the holiday-shortened weak with familiar common themes: the gas pump is king and main street is hiring.

Receipts at U.S. retailers increased by 0.5% in March, according to the Commerce Department.

While the number missed consensus by a hair, it stands on the shoulders of February’s upwardly revised 0.8% growth.

The increase was almost entirely attributable to rising prices at the gasoline pump. Stripping away the 8.9% increase in the rate of wallets being emptied at filling stations, retail sales actually fell 0.3%.

Sticker shock at the Chevron station appears to be convincing consumers to pull back on spending in other areas. Non-store retail sales, which include internet shopping, plunged by 6.4%.

With year-on-year headline CPI reaching a blistering 8.6% – the highest it has been since ‘Raiders of the Lost Ark’ was selling tickets and popcorn – Americans are spending a lot more for less.

But Ted Rossman, senior industry analyst at Bankrate, helps us see the report through rose-ish tinted glasses:

“We continue to see evidence of a resilient consumer,” Rossman writes, in convenient foreshadowing of the UMich data to follow.

“It’s frustrating to be paying so much more for gas, groceries and housing,” he adds. “But most Americans are actually doing pretty well financially.”

Core retail sales, which excludes building materials, autos/parts, gasoline, and food services – and corresponds most closely to the personal expenditures component of GDP – unexpectedly inched 0.1% lower, defying the 0.2% gain analysts expected.

The number of U.S. workers filing first time applications for unemployment insurance rose by 18,000 last week to 185,000, a number which remains below the level economists associate with healthy labor market churn and speaks to the ongoing worker drought.

That drought is evident in job openings hovering near record high despite a 3.6% unemployment rate. Employers are hiking wages and avoiding handing out pink slips.

“The uptick in jobless claims is a seasonal adjustment issue; the trend continues to fall, slowly,” says Ian Shepherson, chief economist at Pantheon Macroeconomics. “Claims are now so low that a further big decline is unlikely.”

Ongoing claims, reported on a one-week lag, declined to 1.475 million, edging further below the pre-pandemic level of 1.7 million.

The cost of goods imported from U.S. trading partners jumped by a hotter than expected 2.6% on a monthly basis and a scorching 12.5% year-on-year.

It was the largest monthly increase since April 2011, and was largely driven by spiking gasoline prices in the face of Russia’s war on Ukraine.

Import prices remain, along with recently released CPI, PPI and other indicators, cruising at an altitude far above the Fed’s average annual 2% inflation target.

See the graphic of assorted inflation indicators below (and grab your surfboard – the wave is rad:

The mood of the U.S. consumer has surprised analysts by brightening considerably this month, according to the University of Michigan’s preliminary April reading.

UMich’s Consumer Sentiment index jumped 6.3 points to 65.7, a move mostly attributable to the 9.8 point surge in the near-term expectations component.

The current conditions segment rose a more modest 0.9 points and near- and long-term inflation expectations held firm at 5.4% and 3.0%, respectively.

The unexpected veer toward optimism could likewise be traced to the petrol pump.

“Retail gas prices have fallen since the March peak, and that fact was immediately recognized by consumers,” Richard Curtin, chief economist at UMich’s Surveys of Consumers. “There are still significant sources of economic uncertainty that could easily reverse the April gains, including the impact on the domestic economy from Putin’s war, and the potential impact of new covid variants.”

In more ancient news, the value of goods piled up in the store room of U.S. businesses increased by 1.5% in February, a stronger reading than the 1.3% forecast and a modest acceleration over January.

This is a positive sign that the supply chain is slowly becoming untangled, allowing U.S. firms to replenish their stocks.

It also bodes well for first quarter GDP, at which the Commerce Department is expected to take its first stab on April 28.

Wall Street was mixed in late morning trading, as benchmark U.S. Treasury yields resumed their uphill climb, once again pressuring market-leading growth stocks.

WILL BACK-TO-BACK RALLIES SNAP WALL STREET’S DOWNWARD TREND? (0900 EDT/1300 GMT)

Pre-market trade in futures on Thursday indicate a weak market and may cast in doubt a halt in the downward trend on Wall Street despite the strong rally the day before.

Nasdaq futures were down 0.24%, while S&P 500 futures fell 0.25%.

Advancing stocks made up more than 80% of volume on the New York Stock Exchange on Wednesday for the first time since March 16th, says BTIG research.

But typically strong upside volume needs to be seen back-to-back to suggest a durable low is in place, says Jonathan Krinsky, chief market technician at BTIG.

“Ideally we would like to see a follow-through day with another 80% upside day, something we haven’t seen since July ’21,” Krinsky said.

“Of course the March 16th event didn’t get that and still led to a strong rally, but that rally eventually ran out of steam,” he said.

S&P e-mini futures remain within a downtrend channel and need to clear the 4,450-4,460 range to break out of that, he said.

While a breakout wouldn’t necessarily change a cautious medium-term outlook, in the short-term it would be respected, he said.

(Herbert Lash)

For Thursday’s posts prior to 0900EDT/1300 GMT click here: