The major domestic equity indexes chalked positive gains on Thursday, the result of optimism the United States and China could resolve their trade dispute, after a news report said Washington would pause further tariffs on Chinese imports.
Wall Street’s major indexes reversed an early drop after the Financial Times reported that U.S. Trade Representative Robert Lighthizer told a group of industry executives the next tranche of tariffs on Chinese imports was on hold.
Wall Street momentarily pared gains after a spokesperson for Lighthizer denied the report, saying plans for the tariffs had not changed. But stocks resumed their upswing and rose further in the last half-hour of trading.
The S&P 500 index gained 28.62 points, or 1.06 percent, to close at 2,730.2, ending a five-day losing streak. Shares of Apple were up 2.5 percent to also end a five-day losing streak and help the technology sector index climb 2.5 percent, making it the largest gainer among the S&P 500’s major indexes.
Shares of Cisco Systems were up 5.5 percent after the network equipment maker’s quarterly revenue and earnings exceeded Street estimates. Cisco was among the best performers on the S&P 500 and the Nasdaq.
Dillard’s fell 14.8 percent after third-quarter earnings missed Street estimates. J.C. Penney also reported same-store sales below consensus expectations J.C. Penney shares managed to climb 11.5 percent after CEO Jill Soltau indicated plans to turn a profit.
The gloomy results from Dillard’s and J.C. Penney hurt Walmart shares, which fell 2.0 percent even though the retailer exceeded same-store sales estimates and raised its full-year outlook.
KB Home fell 15.3 percent after the company cut its fourth-quarter revenue forecast. Shares of other homebuilders, including D.R. Horton, Toll Brothers and Lennar also fell.
Shares of PG&E extended their losing streak to a sixth day, hitting a 15-year low of $17.26 and ending down 30.7 percent. The utility company warned it could face liability in excess of its insurance if its equipment caused the deadly Camp Fire in northern California.
Approximately 8.67 billion shares changed hands on the major domestic equity exchanges, a number that was up from the 8.58 billion share average over the past 20 trading days.
Day’s Economic News
Retail sales were up sharply in October due to purchases of motor vehicles and building material. At the same time, data for the prior two months was revised lower and the underlying trend suggested that consumer spending was probably slowing down.
Nonetheless, the report released by the Commerce Department on Thursday morning indicated broad gains in sales ahead of the holiday shopping season. This bodes well for consumer spending and the overall economy as we move through the fourth quarter.
Retail sales increased 0.8 percent last month. Retail sales in September slipped 0.1 percent instead of rising 0.1 percent and sales in August were also weaker than previously thought.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 percent last month. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
Data for September was revised lower to show core retail sales rising 0.3 percent instead of gaining 0.5 percent as previously reported. Core retail sales fell 0.2 percent in August rather than being unchanged.
While that suggests some loss of momentum in consumer spending, which accounts for more than two-thirds of all domestic economic activity, consumption is being supported by the recent tax legislation. Declining oil prices are seen aiding retail sales in the months ahead.
A robust labor market, marked by a 3.7 percent unemployment rate, is also underpinning spending. The lowest jobless rate in nearly 49 years is resulting in higher wages, with October’s annualized wage growth number recording its largest increase in 9-1/2 years.
Jobs market strength was also underscored by a separate report from the Labor Department on Thursday indicating a marginal increase last week in the number of new unemployment claims filed.
Strong domestic demand and a tightening labor market support views that the Federal Reserve will increase interest rates in December for the fourth time this year. The Fed indicated last week that the labor market has continued to strengthen and that economic activity has been rising at a strong rate.
The retail sales pace, if sustained, could keep the economy on a solid growth path despite a slowing of business investment, a deteriorating trade deficit and a weakending of the housing market.
Though the Commerce Department said it could not isolate the impact of Hurricanes Florence and Michael on October’s retail sales, the storms probably buoyed purchases of automobiles and building materials last month amid recovery efforts.
This was evident as auto sales rose 1.1 percent last month after falling 0.1 percent in September, while building material store sales increased 1.0 percent in October.
There were also increases in sales at clothing stores, online retailers and service stations last month. Consumers spent more on hobbies and at bookstores, while cutting back on furniture purchases.
However, spending at restaurants and bars fell 0.2 percent, likely hurt by hurricane Michael, which hit the Florida Panhandle in mid-October. Sales at restaurants and bars dropped 1.5 percent in September.
Other data on Thursday offered a mixed picture of the manufacturing sector in early November. The New York Fed said its Empire State general business conditions index rose to a reading of 23.3 this month from 21.1 in October.
A slight moderation in the new orders index was offset by strong increases in labor market measures.
Separately, a survey from the Philadelphia Fed showed a slowing in factory activity in the mid-Atlantic region this month, with its current general activity index falling to a reading of 12.9 from 22.2 in October amid a sharp slowdown in new orders.
Firms, however, remained upbeat about business conditions over the next six months. There was also a strong improvement in capital expenditure plans.