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Stocks open lower, retail shares slump

U.S. stocks opened lower as several major retailers reported disappointing results coming out of the holiday season and weak producer and consumer price data from China reaffirmed weakened growth amid an ongoing trade war.

The S&P 500 (^GSPC) fell 0.63%, or 16.17 points, as of 9:34 a.m. ET. The Dow (^DJI) declined 0.44%, or 104.83 points, while the Nasdaq (^IXIC) slipped 0.86%, or 59.59 points.

Prior to Thursday’s session, the three major U.S. indices had each posted four consecutive days of gains.

Domestic stocks on Thursday tracked a descent in Asian markets after China’s most recent inflation data missed expectations. China’s December consumer price index, a metric for prices of goods and services, rose just 1.9% over last year, falling short of expectations of an increase of 2.1% and the previous month’s reading of 2.2%. And the producer price index rose 0.9%, falling short of the 1.6% expected by economists and the 2.7% year-over-year increase from November.

These results follow disappointing data from the country’s manufacturing sector, with factory activity contracting in December for the first time since May 2017 as the ongoing trade war between the U.S. and China weighs on producers.

Delegations from the U.S. and China wrapped up three days of mid-level trade meetings on Wednesday, with the discussions lasting a day longer than initially expected. The office of the U.S.  Trade Representative released a brief statement following the conclusion of the meeting, asserting that the meetings touched on the Trump administration’s concerns over “forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft of trade secrets for commercial purposes, services, and agriculture” with China.

Federal Reserve speeches

The Federal Reserve will be a main focus for investors on Thursday as Federal Reserve Chairman Jerome Powell and Vice Chairman Richard Clarida are each set to deliver speeches. Powell is set to speak at the Economic Club of Washington, D.C., at 12:45 p.m. ET, where he will be delivering prepared remarks before taking questions. Clarida will later speak at 7 p.m. ET at the Money Marketeers of New York University.

Their remarks follow yesterday’s release of the minutes from the Federal Open Market Committee’s latest meeting in December. These showed that several members did believe the bank should pause on rate hikes to reassess economic conditions, and suggested the central bank is considering market concerns of “the possibilities of a sharper-than-expected slowdown in global economic growth, a more rapid waning of fiscal stimulus, an escalation in trade tensions, a further tightening of financial conditions, or greater-than-anticipated negative effects from the monetary policy tightening to date.”

“Many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming,” according to the minutes.

STOCKS: Retail stocks slide after reporting holiday sales

Shares of retail and department store stocks took a beating after the companies reported sales results for November and December. The results painted a mostly dim picture of retail health coming out of the holiday season. The S&P 500 Retail ETF (XRT) declined 3.16% as of 9:45 a.m. ET.

Kohl’s Corp. (KSS) reported holiday sales growth of just 1.2% for November and December. This was considerably weaker than the department store’s comparable sales growth of 6.9% for the same period last year. The company also raised the lower end of its full-year earnings per share guidance and now expects a band of $5.50 to $5.55 per share from $5.35 to $5.55 per share previously. Shares of Kohl’s declined 9.57% to $63.21 each as of 9:19 a.m. ET.

Macy’s (M) reported owned comparative sales growth of 0.7%, and owned plus licensed comparable sales growth of 1.1% for the November and December shopping season. However, the department store cut its full-year 2018 EPS guidance to $3.95 to $4.00 per share, from $4.10 to $4.30 per share previously. The company said it will “continue to take the necessary steps in January to ensure a clean inventory position as we enter fiscal 2019.” Shares of Macy’s slid 17.88% to $26.08 each as of 9:20 a.m. ET.

L Brands (LB), the parent company for brands including Victoria’s Secret, reportedflat comparable sales for the five weeks ending January 5 versus the five weeks ending January 6, 2018, missing consensus expectations calling for an increase of 3.4% for the period. Victoria’s Secret December comparable sales fell 6%, a sharper decline than the 1% decrease expected. The company raised its guidance for adjusted fourth-quarter EPS to the higher end of its previous guidance $1.90 to $2.10, which does not include a preliminary estimated pretax charge, principally non-cash, relating to its sale of La Senza of about $80 million, or 15 cents per share. Shares of L Brands fell 7.75% to $26.05 each as of 9:20 a.m. ET.

Target (TGT) reported its comparable store sales grew 5.7% for the combined November and December holiday season as traffic, comparative digital sales and average ticket each rose. The company reaffirmed its full-year forecast of earnings per share between $5.30 to $5.50. Consensus expectations are for full-year EPS of $5.45, according to Bloomberg data. While Target reported relatively strong comparable store sales growth for the holiday season, its shares reversed gains from early trading amid weak results from peer retailers. Shares of Target slipped 2.7% to $68.40 each as of 9:20 a.m. ET.