U.S. Stocks Waver as Retail Sales Growth Slows
August 14 2020 - 4:59PM
Dow Jones News
By Michael Wursthorn and Joe Wallace
U.S. stocks ended the week roughly where they started, leaving
the S&P 500 hovering just below its February record and a
remarkable rally stuck in neutral.
The broad index closed flat Friday after bobbing between small
gains and losses for most of the session, the latest in a series of
modest moves that left the S&P 500 up 0.6% from where it was a
week earlier.
The S&P 500 attempted several runs this week at a new high,
which would have erased the losses suffered during the coronavirus
pandemic and marked its fastest-ever recovery from a bear market.
But the index repeatedly fell short.
The market's trepidation reflects the uncertainty facing
investors and the country as coronavirus cases and deaths continue
to rise, analysts said. The main sticking point that has dogged
markets lately is the continuing haggling between lawmakers over
additional aid to help the unemployed.
Fresh economic data, including unemployment claims and retail
spending, continue to suggest the economy is recovering, albeit
slowly. Whether the recovery can persist in the absence of further
stimulus is something investors are weighing now, analysts
added.
Despite those concerns, stocks are trading near their highest
levels ever, stretching valuations to a point that haven't been
seen since the dot-com bubble. Tech stocks, which have driven much
of the stock market's recovery, are even pricier and have traded
sideways all week.
"There's a lot of confusion out there," said Larry Swedroe,
chief research officer at Buckingham Wealth Partners, of his
conversations with investors in recent weeks. "They ask how could
stock prices be so high when we're going through this terrible
crisis."
Not helping matters is the looming November election, which is
less than three months away. Former Vice President Joe Biden named
his running mate, Sen. Kamala Harris, on Tuesday, clarifying the
Democratic presidential ticket. Several investors said they expect
to see some election-induced volatility as November nears,
particularly if Democrats appear likely to fare well. That would
raise the likelihood of higher corporate taxes and regulation in
2021.
"The risk of a Biden win could have big, negative implications
for the market," said Mr. Swedroe, although he added trade tensions
between the U.S. and China would likely improve in that
scenario.
On Friday, the S&P 500 fell less than a point to 3372.85,
leaving it 0.4% away from its Feb. 19 record. The Dow Jones
Industrial Average added 34.30 points, or 0.1%, to 27931.02,
finishing the week up 1.8%.
The Nasdaq Composite fell 23.20 points, or 0.2%, to 11019.30
after Apple, Facebook and Amazon.com all notched small losses. The
tech-heavy index ended the week relatively unchanged.
Industrial and energy stocks scored the biggest gains of the
day, rising 0.4% and 0.9%, respectively. But without the
participation of tech stocks, which are particularly influential in
the index, the S&P gained little traction throughout Friday's
session.
Money managers are also awaiting trade talks between senior U.S.
and Chinese officials, scheduled for Saturday. Relations have
deteriorated in recent months, concerning investors who think fresh
barriers to trade would further hurt the global economy.
The main thrust of the discussion is aimed at evaluating China's
compliance with a bilateral trade agreement signed in January.
Chinese Vice Premier Liu He, President Xi Jinping's chief trade
negotiator with Washington, is expected to bring up concerns over
the executive orders against the WeChat and TikTok apps.
"The tone of these talks will be crucial," said Jane Foley, head
of foreign-exchange strategy at Rabobank. "There is a concern that
China has perhaps not fulfilled its promises in, for example,
importing agricultural or energy goods from the U.S."
Several retailers are also expected to report quarterly results
next week, giving investors additional windows into consumer
activity. Walmart, Home Depot and Kohl's are due to disclose
results Tuesday, while TJX and L Brands follow later in the
week.
Write to Michael Wursthorn at Michael.Wursthorn@wsj.com and Joe
Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
August 14, 2020 16:44 ET (20:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.