Stocks Extend Rally After Wholesale Inflation and Retail Sales Reports

Barry Adams
15 Nov, 2023
New York City

Market indexes extended this week's rally after softer inflation in October encouraged investors.

For months, stocks declined on worries of rate path uncertainties, and investors lightened positions in interest rate-sensitive sectors including banks, commercial real estate, and technology.

However, after the Federal Reserve held rates steady for the second time in a row, it cleared the path for the market indexes to advance.

The S&P 500 index and the Nasdaq Composite staged strong comebacks in November, 7% and 9%, respectively, after fears of higher rates receded and softer inflation in October contributed to the market's advance.

The latest data on wholesale inflation and retail sales also supported to the market's gains in today's session.

 

Wholesale Prices Post Largest Monthly Drop Since April 2020

The producer price index, a measure of wholesale inflation, declined 0.5% from the previous month in October, the U.S. Bureau of Labor Statistics reported Wednesday.

On an annual basis, the producer price index increased by 1.3%.

Wholesale price inflation fell at the fastest pace in a single month since April 2020, after good prices declined 1.4% following a rise since May and service prices were unchanged after advancing for six consecutive months.

 

Retail Sales Declined After Rising Six Consecutive Months 

After rising for six months in a row, retail and food services sales declined 0.1% in October from the previous month, the U.S. Census Bureau reported Wednesday.

Retail sales data adjusted for calendar and seasonal factors but not for inflation, suggesting higher prices are keeping consumer spending in check.

On an annual basis, retail sales rose 2.5% in October from an upwardly revised 4.1% in September.

Sales in the three-month period between August and October rose 3.1% from the same period a year ago.

Retail trade sales decreased 0.2% from September and increased 1.6% from a year ago; gasoline station sales were down 7.5% from a year ago; and sales at nonstore retailers increased 7.6% from a year ago.

 

U.S. Indexes and Yields

The S&P 500 index jumped 0.5% to 4,519.29, and the Nasdaq Composite rose 0.6% to 14,183.29.

The yield on 2-year Treasury notes increased to 4.88%, 10-year Treasury notes inched higher to 4.49%, and 30-year Treasury bonds edged up to 4.66%.

Crude oil decreased $0.66 to $77.61 a barrel, and natural gas prices rose 9 cents to $3.20 a thermal unit.

Gold increased $3.21 to $1,965.64 an ounce after bond yields traded in a narrow range.

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.25.

 

U.S. Stock Movers

Target Corp. soared 14.2% to $126.65 after the retailer reported positive quarterly results.

Comparable sales in the third quarter declined 4.9%, and declines in discretionary categories were partially offset by an increase in daily necessities categories, including beauty.

Total revenue declined 4.2% to $25.4 billion, net income in the quarter advanced 36.3% to $971 million from $712 million, and diluted earnings per share rose to $2.10 from $1.54 a year ago.

Inventory at the end of the quarter was 14% lower than a year ago, after a 19% decline in discretionary category inventories.

The company guided fourth-quarter comparable store sales to decline in a wider range around the mid-single digit, reflecting uncertainties about holiday spending.

Advance Auto Parts declined 4.8% to $55.50 after the specialty retailer reported mixed quarterly results.

TJX Companies fell 2.5% to $90.20 after the apparel and household goods retailer reported positive quarterly results, but the company's guidance fell short of some investors' expectations.

Revenue in the third quarter ending in October rose 9% to $13.3 billion from $12.2 billion, net income advanced to $1.2 billion from $1.1 billion, and diluted earnings per share rose to $1.03 from 91 cents a year ago.

Comparable store sales in the quarter increased by 6%, slower than 14% a year ago.

U.S. comparable stores at Home Goods chain rose 9% compared to a decline of 16%, and Marmaxx stores (TJ Maxx and Marshall stores) increased 7% compared to 3% increase a year ago, respectively.

Total inventories at the end of the quarter were $8.3 billion, flat compared to a year ago.

During the quarter, the company repurchased $650 million of its own shares, retired 7.2 million shares, and paid $380 million in shareholder dividends.

The company now expects to repurchase approximately $2.25 billion to $2.5 billion of its stock during the fiscal year ending on February 3, 2024.