Benchmarks ended mixed on Tuesday despite better than expected retail data and a de-escalation in tensions with North Korea. Weaker than expected earnings from Home Depot weighed on the Dow and pared gains for the blue-chip index. However, the Dow ended in the green following gains from American Express and Apple. The S&P 500 ended in the red overall losses in the market because of the slump in the retail sector. The Nasdaq also ended in the negative territory due to broad based losses for the markets.
The Dow Jones Industrial Average (DJIA) closed at 21,998.99, advancing 5.28 points or less than 0.1%. The S&P 500 Index (INX) declined 1.23 points to close at 2,464.61. Meanwhile, the Nasdaq Composite Index (IXIC) closed at 6,333.01, increasing 7.22 points or 0.1%. Declining issues outnumbered advancers on the NYSE by 1,799 to 946. On the Nasdaq, decliners outnumbered advancers by a 1,671 to 1,016.
Retail Sales Notch Up a Seven Month High
Sales at U.S. retailers recorded their biggest increase in seven months in July. Retail sales advanced 0.6% last month, the best performance since a gain of 0.9% last December, according to the Commerce Department. Retail sales jumped 4.2% in the past twelve months, which is near the five-year average. Excluding auto and gasoline, retail sales rose 0.5% in July. In fact, excluding automobiles, gasoline, building materials and food services, retail sales went up 0.6% last month. June’s retails sales were also revised to show a 0.3% gain, in contrast to the previously reported 0.2% decline. May’s retail sales were revised up to show no change instead of the earlier report of a 0.1% dip.
The lion’s share of the spurt in July retail sales was attributable to a pickup in demand for autos and to what is now a national event, Amazon Prime Day. The annual event, during which consumers flock to Amazon.com (AMZN - Free Report) for the year’s best shopping deals, contributed to gains for every product category. The Department of Commerce’s report reflects this as a 1.3% monthly increase in what is categorized as non-store retail spending. But for the sudden spurt in auto sales, other notable movements in the consumer spending report also have crucial linkages with Amazon. For instance, the decline in sales at electronics stores is likely a result of most consumers opting to buy this category of products from online alternatives, possibly Amazon.
Amazon Fells the Traditional Retail Sector
While Amazon did end the day around 0.1% lower, investor attention was largely fixed on the fall in traditional retail stocks. Target Corporation (TGT - Free Report) , Nordstrom, Inc. (JWN - Free Report) , Kohl's Corporation KSS and Dollar General Corporation (DG - Free Report) declined 2.6%, 1.5%, 1.5% and 3.8%, respectively. Only Wal-Mart Stores, Inc. (WMT - Free Report) ended the day unscathed, notching up a minor increase of 0.1%.
The Dow closed higher for the third day on Tuesday. The blue-chip index notched 45 points earlier in the day. These gains were offset by weak earnings from the retail sector. The biggest drag on the Dow was falling shares of Home Depot (HD - Free Report) . The home-improvement company cut about 30 points from the Dow. Such a turn of events makes it amply clear that the company is not immune to “Amazonification” despite its status as a leading specialty retailer. This is particularly surprising since Do-It-Yourself (DIY) and professional customers form Home Depot’s core audience. But the move to sell Kenmore devices via Amazon indicates that even the building products behemoth is now susceptible to the rising power of the Kindle and Fire Stick maker. (Read More: Home Depot (HD - Free Report) Beats on Q2 Earnings & Sales Estimates August 15, 2017)
Telecom, Consumer Discretionary Stocks Drag S&P 500 Lower
The S&P 500 declined on Tuesday as the telecom and consumer-discretionary sectors disappointed. Five of the eleven primary sectors ended in the red, led by consumer discretionary. The Consumer Discretionary Select Sector SPDR (XLY) was down 0.9%. Moreover, Advance Auto Parts Inc. (AAP - Free Report) reported a 16.8% decline in adjusted earnings to $1.58 per share in the second quarter of fiscal 2017 (ended Jul 15, 2017) from $1.90 earned in the prior-year quarter. The figure also missed the Zacks Consensus Estimate of $1.65. Adjusted net income declined to $117 million from $141 million in the second quarter of fiscal 2016. (Read More: Advance Auto Parts (AAP - Free Report) Earnings Miss in Q2, Decline Y/Y).
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