Stocks fell last week on concerns about U.S. retailing, commodity-price weakness, credit data in China, and a stronger dollar. The last hurt large-capitalization stocks, costing the Dow Jones Industrial Average 1.2%.

Investors were perplexed when the Commerce Department said Friday that April retail sales had jumped 1.3%, right after several big department-store operators had reported poor first-quarter numbers. Separately, consumer sentiment in early May improved sharply, data showed.

Macy’s (ticker: M), Kohl’s (KSS), and J.C. Penney (JCP) all reported much lower first-quarter sales last week, and offered generally unappetizing guidance. The department-stores group slumped 16%, with Macy’s down 17%, to $31.21.

The greenback, which has been soft this year, began to move up again in May. That hurt shares of big companies, which tend to have substantial overseas sales. The Dow industrials lost 205 points on the week, to 17,535.32. The Standard & Poor’s 500 index fell 10.5 points to 2046.61, and the Nasdaq Composite dropped 0.4% to finish at 4717.68.

The retail data seem to point up a shift in consumer dollars from malls to online spending, says Brian Lazorishak, a portfolio manager with Stack Financial Management in Whitefish, Mont. While some investors took solace from the surprisingly positive government figures, bears noted the numbers measured the past, while the downbeat guidance from department stores was forward-looking.

Chinese steel futures fell more than 10% last week and are down about 25% from a peak in April, and there are signs the selloff is spreading to other global markets and other commodities. Additionally, Chinese credit data showed a sharper drop than expected in April in most lending categories.

The market has been trading in a range around 2100 for a while, and “looks as if it is struggling for additional multiple expansion” to push up the indexes, says John Brady, a sales trader at R.J. O’Brien. He sees the market moving sideways short-term, with the Federal Reserve ever ready to prop it up with dovish talk about rate-hike expectations.

Lazorishak says there is enough technical strength to give the rally the benefit of the doubt, but it looks like it is running out of steam just as the market enters a traditionally weak season.

(Source: Barrons Online)

Stocks fell last week in response to underwhelming quarterly earnings reports and disappointing economic data from the U.S. and China. Large-capitalization stocks outperformed small-caps. Fears about slowing global growth clipped cyclical stocks in sectors such as energy, mining, and industrials, which had led the market since the Feb. 11 low.

The Dow Jones Industrial Average eased 33 points on the week, to 17,740.63. The Standard & Poor’s 500 index fell 8 to 2057.14. The Nasdaq gave up 0.8% to finish at 4736.16.

The Labor Department said Friday that nonfarm payrolls rose 160,000 last month, below expectations of 205,000 additions and the lowest number of jobs added in seven months. The unemployment rate was unchanged at 5%. Wages rose a strong 2.5%. Separately, Labor said U.S. first-quarter productivity, or output per worker, declined 1%.

Robert Pavlik, chief market strategist at Boston Private Wealth, says the primary cause of market weakness was a drop in April manufacturing numbers, both in the U.S. and China, released at the beginning of the week. Continued softness in the U.S. dollar had been helping cyclicals, many with sales generated overseas. But “all of a sudden,” he says, the falling dollar was taken by some investors as a sign of U.S. economic malaise.

The data showed three things, none of which are good for cyclicals, says Jim Tierney, portfolio manager at AllianceBernstein: “The U.S. economy is pretty darn sluggish; wage inflation is creeping higher; and productivity is terrible.”

The deterioration in first-quarter earnings—and not just among energy companies—was also a factor, says William Nichols, a managing director at Cantor Fitzgerald. Companies are beating earnings expectations that had been lowered, but the top line remains challenged, he adds.

Many companies are topping earnings-per-share expectations, but the percentage of those beating revenue estimates is 53%, below the five-year quarterly average.

Now that the reporting season is just about done, investors will turn their focus to the June 15-16 Federal Open Market Committee meeting. Although a rate hike isn’t expected, they’ll be parsing Fed officials’ commentary before then. The market could tread water ahead of the meeting.

(Source: Barrons Online)