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April retail sales rose 1.3%, substantially exceeding expectations of 0.9%. Auto sales were a major driver of the strong result, with sales rising 3.2% from March. Ex-autos, April retail sales rose 0.8%. Apparel and restaurants had notably higher sales. Building materials and gardening equipment were the only components to decline, possibly suggesting slower growth in the residential investment market.
April producer prices had a slight increase of 0.2%. Ex-food and energy, prices rose only 0.1%. The report may suggest only a modest near-term increase in inflation.
March business inventories increased 0.4%, exceeding expectations of 0.2%. The inventory-to-sales ratio remained constant at 1.41. Increased April sales may suggest March’s buildup in inventories.
Initial jobless claims rose 20,000 from the week of May 7th to a total of 294,000, the highest number of jobless claims since February. Continuing claims rose by 37,000. The spike in initial claims raises concerns about the direction of the labor market in the coming weeks.
Consumer sentiment lurched upwards from the April survey, up to 95.8 from 89, reaching the highest level since last June. The improved sentiment was due to increasing income gains and lower inflation expectations. Inflation expectations fell steeply by 0.3%.
This week, several retailers reported disappointing quarterly results. Macy’s (M) reduced its profit forecast following earnings of $0.40 per share and a 7.4% decline in sales, in part due to a strong dollar discouraging purchases by tourists. Kohl’s (KSS) reported a drop of 3.9% in sales and increased costs. The Gap (GPS) reported a 6.5% decline in sales for March. Michael Kors, Nordstrom, and Ralph Lauren all declined in the wake of their peers’ disappointing reports.
Disney (DIS) reported a disappointing 2% decline in sales due to poor results from its cable networks, parks, and consumer products units. Particularly concerning was ESPN’s loss of subscribers, raising questions about how the company will weather the current cord-cutting trend.
Apple (AAPL) fell to a two-year low, falling 2.35% to $90.34 as concerns grew about the slowing demand for iPhones, Mac computers, tablets, and the uncertain future of the Apple Watch. In Thursday’s trading session following Apple’s decline, Google became the largest public company by market cap.
Amazon (AMZN) rose 2.9% to an all-time high after announcing the release of a self-publishing video platform called Video Direct. Video Direct is expected to challenge Google’s YouTube for creators and viewers of video content.
Jack in the Box (JACK) surged after reporting $0.85 in earnings per share driven by increased sales at its Qdoba Mexican Restaurants. Wendy’s (WEN) fell substantially despite a positive report of $0.11 in earnings per share. Additionally, Wendy’s announced the rollout of self-service kiosks at over 6,000 stores.
The peer-to-peer lending platform, Lending Club (LC), declined 42% after the questionable sale of a loan to an investor, highlighting the risks of the nascent peer-to-peer lending industry.
Tuesday May 17 — Consumer Price Index (an indicator of inflation)
Tuesday May 17 — Housing Starts (a gauge of housing market strength)
Wednesday May 18 — FOMC Minutes (Fed minutes of its April meeting)