Wall Street closed higher on Friday as investors gave more importance to reopening of the economy and a proposed new set of stimulus over disappointing economic data. Meanwhile, geopolitical tensions between the United States and China has intensified. All three major stock indexes ended in the green.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) gained 0.3% to close at 23,685.42. Notably, 15 components of the 30-stock blue-chip index ended in green while 15 finished in the red. Meanwhile, the S&P 500 rose 0.4% to close at 2,863.70. The Communication Services Select Sector SPDR (XLC) and Consumer Discretionary Select Sector SPDR (XLY) advanced 1.4% and 1.2%, respectively. Notably, 6 of the eleven sectors of the benchmark index closed in the green while 5 finished in red.
The tech-heavy Nasdaq Composite closed at 9,014.56, increasing 0.8% due to the strong performance of large-cap tech stocks. Major gainer of the index was the Zacks Rank #2 company NVIDIA Corp. (NVDA - Free Report) which surged 5.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The fear-gauge CBOE Volatility Index (VIX) decreased 2.2% to close at 31.89. A total of 11.36 billion shares were traded on Friday, slightly lower than the last 20-session average of 11.39 billion. Advancers outnumbered decliners on the NYSE by a 1.41-to-1 ratio. On Nasdaq, a 1.69-to-1 ratio favored advancing issues.
Disappointing Economic Data
The Department of Commerce reported that retail sales in April plunged 16.4%, wider-than the consensus estimate of a decline of 12.1%. March's retail sales was revised to a decline of 8.3% from 8.7% reported earlier. Core retail sales - excluding auto sales - declined 17.2%, surpassing the consensus estimate of a decline of 8.2%. Year over year, retail sales declined 17.8% in April.
Sales in clothing store, electronics and appliances, furniture and home furnishing, sporting goods, and bars and restaurants plummeted 78.8%, 60.6%, 58.7%, 38% and 29.5%, respectively. However, internet-based online sales surged 8.4%.
Industrial production in April plunged 11.2%, marking the largest monthly decline of the index's history. However, the consensus was for a decline of 11.7%. Data for March was revised to a decline of 4.5% from 5.4% reported earlier. In April, manufacturing output declined 13.7%. Capacity utilization was declined to 64.9% compared with the consensus estimate of 64.5%. Capacity utilization in March was revised to 73.2% from 72.7% reported earlier.
The University of Michigan’s consumer sentiment index came in at 73.7 for May. compared with 71.8% in April. The consensus estimate was 66.6. The current economic condition stood at 83 against 74.3 in April. However, consumer expectations index declined to 67.7 from 70.1 in the last month.
Proposal for New Stimulus and Reopening of the Economy
On May 15. the Democratic-run House of Representatives approved its $3 trillion coronavirus relief bill to strengthen the economy. The Trump administration has expressed its desire to consider and discuss about the new stimulus package. Notably, the U.S. government and the Fed together already injected an unprecedented 48 trillion of stimulus to the coronavirus-stricken economy.
Meanwhile, several states in the country are considering plans to reopen the economy systematically. States like Alaska, Georgia, South Carolina, Tennessee and Texas have already started allowing restaurants, salons, spas and barbershops to serve customers. Mike DeWine, governor of Ohio, has decided retail stores and other service industries to reopen. Andrew Cuomo, governor of coronavirus hotspot New York, said that the economy will be opened in phases.
The last week was a disappointing one for Wall Street in which all three major stock indexes tumbled. The Dow, the S&P 500 and the Nasdaq Composite tanked 2.7%, 2.3% and 1.2%, respectively. Dilemma over reopening the economy, heightened trade-related and geopolitical tensions between the United States and China and lack of availability of any proper line of treatment for COVID-19 were the primary reasons for Wall Street's poor showing.
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