Friday May 15th

15-05-2020

Dow futures fall more than 200 points on record retail sales drop, increased China tensions

U.S. stock index futures fell on Friday on the back of a record plunge in U.S. retail sales and rising trade tensions between China and the U.S. Dow Jones Industrial Average futures fell 247 points, or 1.1%. S&P 500 futures lost 1.1%. Nasdaq-100 futures slid 1.4%. U.S. monthly retail sales fell by 16.4% in April, a record. Economists polled by Dow Jones expected a decline of 12.3%. So-called core retail sales —which exclude auto, gas, food and building materials sales — dropped 15.3%. The Trump administration has moved to block semiconductor shipments to Chinese company Huawei. The Commerce Department said it would “strategically target Huawei’s acquisition of semiconductors that are the direct product of certain U.S. software and technology.” Meanwhile, Hu Xijin, editor-in-chief of Chinese state-run publication Global Times, tweeted on Friday that China would “restrict or investigate” U.S. companies including Qualcomm, Cisco Systems and Apple if the U.S. takes further action to block Huawei’s supply chain. Hu’s Twitter account was closely followed last year by traders looking for insight on the U.S.-China trade war. Shares of semiconductor makers AMD, Nvidia and Skyworks Solutions all fell more than 1% in the premarket. Apple shares slid 2.3% while Cisco and Qualcomm fell 2.2% and 3.7%, respectively. The Dow rallied more than 300 points while the S&P 500 gained over 1% on Thursday. The Nasdaq Composite advanced 0.9%. Gains in bank and energy stocks lifted the major indexes while shares of major tech companies such as Apple and Alphabet added to their recently massive gains. Despite those gains, however, Wall Street was headed for its biggest weekly decline since late March. The Dow and S&P 500 both ended Thursday’s session down more than 2% for the week. The Nasdaq had lost nearly 2% week to date. Those would be the averages’ worst weekly performances since the week ending March 20. The Dow, S&P 500 and Nasdaq all fell at least 12.6%. “Given the amount of uncertainty about this crisis that still looms, we should not be surprised by the setbacks we’ve seen in markets this week,” said Scott Knapp, chief market strategist at CUNA Mutual Group. More than 4.4 million coronavirus cases have been confirmed globally, according to data compiled by Johns Hopkins University. In the U.S. alone, there have been over 1.4 million known infections. Major investors David Tepper and Stanley Druckenmiller also raised concerns earlier in the week about the market’s overall valuation. Tepper said this is the second-most overvalued market he has ever seen while Druckenmiller noted the risk/reward for owning equities right now is the worst of his career. However, Trian Partners’ Nelson Peltz said Thursday there is still value in this market, adding: “This thing is not going to last forever.” The Dow and the S&P 500 remain more than 29% above an intraday low reached on March 23. The Nasdaq Composite has surged about 35% in that time. Stocks in Asia were little changed on Friday as data showed China’s industrial output bouncing back more than expected in April. Mainland Chinese stocks were mixed on the day, with the Shanghai composite slightly lower at around 2,868.46 while the Shenzhen composite added 0.159% to about 1,808.56. Hong Kong’s Hang Seng index hovered around the flatline, as of its final hour of trading. In Japan, the Nikkei 225 closed 0.62% higher at 20,037.47 while the Topix index rose 0.5% to end its trading day at 1,453.77. South Korea’s Kospi added 0.12% to close at 1,927.28. Oil prices rose on Friday, extending day-earlier gains, as data showed demand for crude picking up in China after the easing of curbs to stem the coronavirus outbreak, boosting hopes that the global supply overhang may start to fade. Brent crude was up 31 cents, or 1% at $31.47 per barrel, after rising nearly 7% on Thursday. The global benchmark is heading for a 1.8% gain on the week after rising for the previous two weeks. West Texas Intermediate was up 21 cents, or 0.76%, at $27.77 per barrel, having jumped 9% in the previous session. WTI is heading for a third weekly increase, up more than 12%. Gold hit its highest in more than three weeks on Friday as Sino-U.S. relations took a turn for the worse  and investors fretted that the economy would take longer than expected to recover from a coronavirus-induced slump. Spot gold gained 0.4% to $1,735.67 per ounce by 0616  GMT, having earlier touched its highest since April 23 at  $1,737.50. U.S. gold futures rose 0.3% to $1,746.20.