S&P 500 and Nasdaq Soar 1% After Consumer Price Inflation Eased

Alexander Garcia
15 May, 2024
Miami

Stocks and benchmark indexes advanced in Wednesday's trading after consumer price inflation rose at a slower-than-expected pace in April. 

The S&P 500 index and the Nasdaq Composite advanced 1% and traded at new record highs following the weaker-than-expected increase in inflation. 

Investors overlooked the acceleration of producer price inflation data released on Tuesday and increased exposure to tech and high-growth companies in the belief that the Federal Reserve is more likely to cut interest rates later in the year. 

Despite the easing of consumer price inflation in April, prices are still rising at a faster pace than the Fed's target rate of 2%, even after eleven rate hikes over the last three years. 

 

Retail Sales Flat in April 

Retail sales in April rose less than expected as consumers battled elevated prices for food and shelter and high interest rates. 

Advance retail sales adjusted for seasonal factors but not for inflation were flat compared to the previous month in April, the U.S. Census Bureau reported Wednesday. 

Retail sales rose 3.0% from a year ago to $705.2 billion, indicating consumers are still spending but staying focused on the basics and avoiding discretionary items. 

March retail sales were upwardly revised to 0.7% from the previous estimate of a 0.6% increase. 

Retail trade sales were virtually unchanged from March but up 2.7% above last year. 

Nonstore retailers were up 7.5% from last year, while food services and drinking places were up 5.5% from April 2023. 

 

Core Consumer Price Inflation Drops to a 3-year Low

Consumer price inflation rose at a slower annual pace of 3.4% in April from 3.5% in March, the U.S. Bureau of Labor Statistics reported Wednesday. 

The seasonally adjusted inflation index rose 0.3% in April after rising 0.4% in March on a monthly basis. 

The index for shelter and gasoline rose, and combined, these two indexes contributed over seventy percent of the increase in all items. 

The energy index increased 1.1% over the month, and the food index was unchanged. 

The prices for used and new vehicles, household furnishings, and operations declined in the month. 

The so-called core index, which excludes energy and food prices, slowed to a 0.3% increase after rising to 0.4% in each of the three previous months. 

The annual pace of core consumer price index dropped to 3.6%, the lowest level since April 2021. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.9% to 5,291.54, and the Nasdaq Composite rose 1.0% to 16,679.48. 

The yield on 2-year Treasury notes edged lower to 4.76%, 10-year Treasury notes decreased to 4.37%, and 30-year Treasury bonds edged lower to 4.53%.

WTI crude oil decreased $0.11 to $78.13 a barrel, and natural gas prices increased 6 cents to $2.39 a thermal unit.

Gold increased by $29.01 to $2,384.60 an ounce, and silver rose 85 cents to $29.46. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 104.41.

 

U.S. Stock Movers

AMC Entertainment decreased 7.8% to $6.89, and GameStop Corp. plunged 10% to $43.70. 

Nextracker Inc. increased 14.5% to $49.24 after the solar technology company said revenue in the fiscal fourth quarter increased more than expected. 

Revenue in the quarter rose 42% to $737 million from $518.9 million, net income advanced to $223.2 million from $27.5 million, and diluted earnings per share rose to $1.51 from 2 cents a year ago. 

The company estimated fiscal 2025 revenue between $2.8 billion and $2.9 billion, net income between $369 million and $399 million, and diluted earnings per share between $2.41 and $2.61. 

Boot Barn Holdings dropped 6.3% to $100.31 after the western apparel retailer offered a muted annual outlook. 

Net sales fell 8.7% to $388.5 million, and decreased 2.2% when $28.3 million of sales in the 14th week of the prior-year period were excluded. 

Same-store sales declined 5.9% in the first quarter compared to the prior-year period, and same-store sales on a 3-year stack basis rose 55%. 

The 5.9% decrease in consolidated same-store sales is comprised of a 5.7% decrease in retail store sales and a 7.6% decrease in e-commerce.

Net sales declined to $388.5 million from $425.6 million, net income dropped to $29.4 million from $46.4 million, and diluted earnings per share dropped to 96 cents from $1.53 a year ago. 

The company guided fiscal 2025 sales to fall between $1.766 billion and $1.800 billion, representing growth of 5.9% to 8.0% over the prior year.

The retailer estimated net income of $140.2 million to $149.3 million and net income per diluted share of $4.55 to $4.85 based on 30.8 million weighted average diluted shares outstanding.

 

European Markets Close at Record Highs 

European market indexes advanced and extended further into record territory after the release of the GDP, employment, and industrial production data. 

Benchmark indexes in Paris, London, and Frankfurt advanced between 0.2% and 0.5%, and the euro strengthened against the dollar and other leading currencies. 

 

The Eurozone Economy Expands in the First Quarter 

Seasonally adjusted GDP in the first quarter rose 0.3% from the previous quarter, Eurostat, the statistical office of the European Union, reported in its flash estimate on Wednesday. 

The economy expanded in the first quarter after shrinking in the previous two quarters in a row by 0.1%, when measured on a quarterly basis. 

GDP in the first quarter rose 0.4% from a year ago, faster than the 0.1% annual increase in the fourth quarter of 2023. 

GDP in Germany contracted for the third quarter in a row by an annual 0.2%, in France it expanded by 1.1%, in Spain by 2.4%, and in Italy by 0.6%. 

Ireland led the currency union with a decline of 4.9%, Estonia by 2.1%, and Austria by 1.3%. 

 

Employment Growth Slowed In the First Quarter

The statistical agency also said the number of employed persons in the eurozone increased by 0.3% from the previous quarter to 169.8 million. 

From a year ago, the total number of people on the payroll increased by 1.0%, slower than the 1.2% increase in the fourth quarter. 

Employment in Germany increased by 0.2%, in France by 0.2%, and in Italy by 0.3%. 

 

Eurozone Industrial Production Eased in March

Seasonally adjusted industrial production rose 0.6% from the previous month in March, according to the first estimate released by the statistical agency on Wednesday. 

On an annual basis, industrial production declined by 1.0% in both the Euro Area and the European Union. 

Industrial production of energy decreased by 3.5%, intermediate goods fell by 2.3%, durable consumer goods dropped by 8.3%, non-durable consumer goods declined by 7.0%, and capital goods increased by 1.8%. 

The largest annual decreases in industrial production were recorded in Finland by 7.7%, in Bulgaria by 7.6%, and in Austria by 7.0%. 

The largest increases were observed in Ireland by 37.0%, in Cyprus by 8.5%, and in Romania by 3.5%.

 

Europe Indexes and Yields

The DAX index increased by 0.8% to 18,869.36; the CAC-40 index rose by 0.2% to 8,239.99; and the FTSE 100 index inched higher by 0.2% to 8,445.80.

The yield on 10-year German bonds edged down to 2.47%; French bonds inched lower to 2.98%; the UK gilts edged lower to 4.11%; and Italian bonds inched lower to 3.80%.

The euro edged higher to $1.082; the British pound inched higher to $1.252; and the U.S. dollar eased to 90.50 Swiss cents.

Brent crude increased $0.18 to $82.58 a barrel, and the Dutch TTF natural gas fell by €0.17 to €29.48 per MWh.

 

Europe Stock Movers

InPost increased 10.4% to €16.83 after the Polish parcel delivery company reported that its first quarter core profit surged by 36%. 

ABN AMRO Bank declined 3% to €16.18 after the Dutch bank reported weaker capital ratios in the first quarter following the rise of risk-weighted assets, which overshadowed strong earnings. 

The bank's CET 1 ratio, a measure of the bank's own capital to risk-weighted assets, decreased to 13.8% in the first quarter from 15.0% a year ago. 

Net interest income in the quarter decreased 2% from a year ago to €1.59 billion, and the bank guided 2024 to a net interest income of €6.3 billion. 

One of the three largest banks in the Netherlands said higher staffing expenses are likely to increase total costs to €5.3 billion. 

However, the bank's profit in the first quarter increased by 29% to €674 million, ahead of the market estimate of at least €510 million. 

The bank also confirmed the completion of the €500 million stock buyback plan it launched in February. 

Neste Oyj dropped 19.4% to €19.40 after the Finnish biofuel maker lowered its 2024 margin estimate for renewable energy products. 

Vodafone Group increased 3.6% to 76.16 pence after the struggling telecom carrier launched a €500 million stock buyback plan. 

Britvic Plc soared 7.7% to 988.0 pence after the British beverage maker said revenue and profit in the first half increased and the company announced a £75 million stock buyback plan. 

Hunting plc increased 22% to 454.0 pence on news that the engineering company won a new order worth $145 million from Kuwait Oil Company. 

ThyssenKrupp declined 1.9% to €4.83 after the German steelmaker lowered its annual sales and earnings outlook for the second time in three months. 

 

Nikkei Index In Tokyo Traded Sideways Amid Yen Worries 

Stocks and market indexes in Tokyo edged higher, tracking gains in overnight trading in New York. 

Market sentiment was positive in Tokyo despite the hotter-than-expected U.S. producer price inflation in April, suggesting that the Federal Reserve may keep high interest rates for longer. 

The Japanese yen dropped by 0.2% to 156.24 against the U.S. dollar after the inflation report highlighted the possibility that a wide interest rate gap between the U.S. and Japan is likely to persist for a long time. 

Investors are now looking forward to the release of the consumer price inflation report later in the day, and economists are anticipating the annual inflation rate to hover around 3.2%. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average increased 0.1% to 38,391.08, and the Topix index edged up 0.1% to 2,732.38. 

Sony Group Corp. soared 9.8% to ¥13,035.0 after the company said its quarterly profit advanced following the strong performance in its movie and game business. 

Tech stocks traded higher following the gains in overnight trading in New York. 

Tokyo Electron, Advantest, Screen Holdings, and Socinext gained between 1% and 3%. 

Banks traded mixed, and Mitsubishi UFJ declined 0.5% to ¥1,597.50, while Mizuho Financial and Sumitomo Mitsui edged higher by 0.45. 

Isetan Mitsukoshi soared 13% to ¥2,642.0 after the department store operator's operating earnings outlook surpassed market expectations. 

The retailer estimated fiscal fourth quarter revenue to increase 12% to 134.67 billion yen and net income to advance 91% to 24.47 billion yen. 

A weak yen and a surge in tourism supported the sharp gains in retail store chain sales. 

Sales of high-value-added products continued to drive sales, particularly at the Isetan Shinjuku Main Store, Mitsukoshi Nihombashi Main Store, and Mitsukoshi Ginza Store, with year-on-year sales growth of 115.2% for the total of Isetan Mitsukoshi Ltd. and 111.3% for the total of domestic department stores, the company said in a note to investors. 

In addition, both main stores and the Mitsukoshi Ginza Store have outperformed fiscal 2018 for ten consecutive months.

Yokohama Rubber advanced 5.2% to ¥4,158.0 after the company reported another record quarterly sales. 

Revenue in the March quarter increased 23.5% to 252.4 billion yen, net income advanced 104% to 19.8 billion yen from 9.7 billion yen, and diluted earnings per share rose to 123.15 yen from 60.39 yen. 

Nitori Holdings plunged 17% to ¥17,805.0 after the home furnishing retailer reported lower than expected sales in the March quarter. 

Revenue in the quarter fell to 232.05 yen compared to expectations of 236.98 billion yen, and net income declined to 18 billion yen, falling short of the expectation of 26.7 billion yen. 

For the full-year 2024, sales declined 5.5% to 895.7 billion yen from 948.1 billion yen, net income attributable to shareholders fell 9% to 86.5 billion yen from 95.1 billion yen, and basic earnings per share fell to 765.62 yen from 841.92 yen a year ago. 

 

U.S. China Tensions Drag Down Stocks In Shanghai 

Stock market indexes in Shanghai traded down amid rising tensions between China and the U.S. 

Markets in Hong Kong are closed to celebrate the birthday of the Buddha.

Chinese authorities said they will take appropriate measures to defend the interests of their corporations after U.S. President Joe Biden approved a sharp increase in tariffs on electric vehicles, solar panels, batteries, and other renewable energy products imported from China. 

The overall impact of the tariffs is expected to be minimal, but the worsening of the tone and growing trade uncertainty are likely to force Chinese companies to relocate manufacturing away from China and closer to its major international markets. 

The U.S. move is going to alter the global supply chain in several industries as Chinese companies seek to relocate manufacturing to Mexico and Hungary, taking advantage of regional trade zones to access the U.S. and European markets. 

 

PBOC Holds One-year Lending Rates 

The People's Bank of China held its key one-year lending rate at 2.5%, and the central bank launched the sale of 125 billion yuan bonds for financial institutions at the unrevised rate on Wednesday. 

Market sentiment has been positive over the last three months after benchmark indexes in Shanghai and Hong Kong rebounded from the lows of February 16. 

Last month, China's politburo announced its plans to release market-supportive measures and encouraged state-controlled financial institutions to increase exposure to Chinese stocks. 

The announcements supported the three-month rally that lifted the Hang Seng index by more than 20%, but investors have been increasingly doubting the rally's durability after the authorities failed to follow up with specific steps to revive the moribund property market and improve consumer confidence. 

Moreover, rising tensions between the U.S. and China also contributed to caution in stock trading this week. 

 

China Stock Movers 

The CSI 300 index fell 0.3% to 3,647.19 and the Hang Seng index decreased 0.2% to 19,073.71 in Tuesday's trading. 

Electric vehicle makers were in focus amid rising tensions between the U.S. and China. 

Dongfeng Motor, BYD, and FAW Jiefang Group declined between 1% and 3%. 

Tongwei Co. declined 1.5% to 22.34 yuan in Shanghai trading. 

Banks were in focus after the People's Bank of China held its one-year medium-term lending rate at 2.5%. 

Bank of China, China Merchants Bank, Agriculture Bank of China, and ICBC gained between 0.1% and 1.3%.