S&P 500 Index Falls to One-Month Low Amid Data, Retailer Results

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  • Subdued reaction to positive signs on consumer health
  • Add Nordstrom, J.C. Penney to list of retailer letdowns

U.S. stocks fell, with the S&P 500 marking the longest weekly losing streak in four months, amid lackluster results from large retailers while data signaling consumers remain healthy added to the case for higher interest rates.

Despite signs of vitality among consumers, companies that rely on their willingness to spend were among the biggest losers Friday as Nordstrom Inc. and J.C. Penney Co. added to a list of disappointing results and outlooks from department stores this week. Losses among banks accelerated in afternoon trading while energy producers retreated as crude prices fell for the first time in four days.

The S&P 500 dropped 0.9 percent to 2,046.61 at 4 p.m. in New York, closing at a one-month low with a third straight weekly loss. Declines gathered pace in afternoon trading as the gauge slipped below its average price during the past 50 days. The Dow Jones Industrial Average lost 185.18 points, or 1.1 percent, to 17,535.32, a seven-week low. The Nasdaq Composite Index dropped 0.4 percent. About 6.6 billion shares traded hands on U.S. exchanges, 12 percent below the three-month average.

“You’d think the retail numbers would prevent the market from going lower like in the last couple weeks,” Mark Kepner, an equity strategist at Chatham, New Jersey-based Themis Trading LLC, said by phone. “But there are some other issues with the market right now. Every time we get up to 2,100 there’s resistance, and overall the earnings aren’t great and that’s a factor as well.”

A report today showed sales at retailers in April saw the biggest gain since March 2015, contrasting with weak quarterly results this week from major chains including Macy’s Inc. and Kohl’s Corp. Nordstrom tumbled 13 percent, the most in the S&P 500 Friday, after cutting its annual forecast. Wal-Mart Stores Inc. lost 2.9 percent to lead declines in the Dow. Amazon.com Inc. slipped 1.1 percent to fall for the first time in six days.

A rally that sent the S&P 500 up as much as 15 percent has been struggling to regain momentum since reaching a four-month high on April 20, amid mixed earnings and lukewarm signs of an economic pickup. This week was marked by the benchmark surging the most in two months on Tuesday as commodities rebounded, only to slide by the most in a month Wednesday after disappointing results from Walt Disney Co. and Macy’s spurred a broader selloff.

Weaker-than-forecast quarterly reports at tech giants including Apple Inc., Microsoft Corp. and Google parent Alphabet Inc. have been among the obstacles for equities. As the earnings season winds down, analysts estimate income at S&P 500 companies fell 7.4 percent in the first quarter compared with forecast for flat growth earlier this year. Of those that have announced results so far, about 74 percent beat profit forecasts, and 54 percent exceeded sales expectations.

Along with the retail sales report, investors are scouring other data for clues on the economy’s health and possible trajectory of interest rates. A measure today showed consumer confidence jumped in May to the highest level in almost a year, while another report said wholesale prices rose in April for the first time in three months. A separate gauge showed growth in business inventories continues to outpace that of sales.

Two Federal Reserve presidents, Boston’s Eric Rosengren and Kansas City’s Esther George, yesterday made separate but similar cases for a rate increase, arguing that the central bank risks stoking an asset bubble by delaying action for too long. Still, traders are pricing in only a 4 percent chance the Fed will act in June. December is the first month with at least even odds of higher borrowing costs.

In Friday’s trading, all of the S&P 500’s 10 main industries fell, with six groups sinking more than 1 percent. Consumer staples, energy, financial and industrial companies lost at least 1.2 percent. The CBOE Volatility Index increased 4.4 percent to 15.04, a one-week high. The measure of market turbulence known as the VIX trimmed its May decline to 4.2 percent from more than 13 percent earlier this week.

Transportation companies were among the worst performers in the industrial group, with the Dow Jones Transportation Average capping the biggest weekly slide since January. Ryder System Inc. fell the most in two months, while railroads Norfolk Southern Corp. and Kansas City Southern dropped at least 2.4 percent. Caterpillar Inc. lost 2.3 percent and extended a weekly losing streak to four, the most since September.

Banks in the benchmark tumbled to the lowest level in month. Wells Fargo & Co. and Citigroup Inc. dropped at least 1.9 percent. The KBW Bank Index fell 1.6 percent. Among other financials, real-estate companies extended the steepest weekly decline since February, led by mall and shopping-center owners. Macerich Co. and Simon Property Group Inc. sank more than 2.7 percent.

Among energy producers, Transocean Ltd. and Southwestern Energy Co. fell the most, down more than 4.4 percent. Chevron Corp. slumped 1.4 percent. Crude pared a weekly gain as investors weighed the return of output from Canadian producers against supply reductions from the U.S. to Nigeria.

Wal-Mart was one of the heaviest drag on the staples group as it posted the worst week in seven months. PepsiCo Inc. slid 1.8 percent, the steepest in more than two months, after a regulatory filing showed Nelson Peltz’s Trian Fund Management LP eliminated its stake in the beverage-and-snack giant. Costco Wholesale Corp. fell for a third day, losing 1.5 percent. In the broader retailer group, Target Corp. and Dollar Tree Inc. sank at least 2.2 percent.

In the consumer discretionary segment, Nordstrom fell the most, while Michael Kors Holdings Ltd. declined 4.3 percent amid its longest streak in almost 10 months. Tiffany & Co. and Urban Outfitters Inc. lost more than 2.9 percent.

Nvidia Corp. rose 15 percent, the most in more than seven years, to an all-time high. The biggest maker of graphics chips used in high-end gaming computers, predicted sales that may top analysts’ estimates, signaling game players continue enthusiastically to seek the latest technology.