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Aug. 14, 2020, 4:35 p.m. EDT

Dow finishes with small gain after weaker-than-expected rise in retail sales

U.S. and Chinese officials this weekend were meant to review China’s compliance with the phase one trade deal, but that was cancelled midday

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By William Watts, MarketWatch , Andrea Riquier


AFP/Getty Images

Stocks posted a mixed finished Friday, spending much of the session near unchanged after a weaker-than-expected rise in retail sales underlined lingering questions about the economy’s resilience following its pandemic-induced collapse in the spring.

What did major indexes do?

The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.05% closed up 34.30 points, 0.1%, at 27,931.02, after flipping positive in the last moments of trade. The S&P 500 /zigman2/quotes/210599714/realtime SPX -1.69%  fel 0.58 point, or less than 0.1%, to finish at 3,372.85. The Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.24% shed 23.20 points, or 0.2%, to close at 11,019.30.

The benchmarks scored weekly gains, with the Dow up 1.8% and the S&P 500 rising 0.6%. Friday’s gain turned the Nasdaq barely positive for the week, up 0.1%. The S&P 500 briefly traded above its Feb. 19 closing high of 3,386.15 on Wednesday and Thursday, but was unable to hang on for a record.

What drove the market?

Stocks were mixed in the morning after the government reported that retail sales rose 1.2% in July, the third straight monthly increase but weaker than the 2% rise forecast by economists surveyed by MarketWatch. Excluding autos and gasoline, sales rose 1.5%, beating expectations for a 1.1% increase. June sales were revised higher.

Meanwhile, analysts said the continued deadlock between congressional Democrats and the White House over a coronavirus aid package could be limiting upside for the market. Negotiations to extend measures, including $600 a week in additional unemployment benefits, that expired at the end of July have remained stalled since the end of last week. President Donald Trump last weekend signed executive orders that would partially extend some measures, but those face questions about their legality and logistics.

“We have had recent good news on the jobs front and retail sales in July are up from a year ago. But in the risk category is consumer confidence, which has been deteriorating in recent weeks with fear that a much needed fiscal support package may not happen,” said David Donabedian, chief investment officer of CIBC Private Wealth Management.

“Income support from the government has been critical and there is a big risk to the economy and the stock market if it does not continue,” he said.

Economists warned that the retail data indicated consumer spending had lost some steam, underlining fears of a further slowdown.

The data “underscores that wary consumers have turned more cautious amid a virus resurgence and fading stimulus support,” said Lydia Boussour, senior economist at Oxford Economics. She said the data also matches up with a stall in the firm’s own recovery tracker, confirming that “consumers are likely to keep a tight rein on their spending until a medical solution to the pandemic is found.”

But stocks edged to session lows after news reports that virtual talks between Chinese and American officials scheduled for the weekend had been postponed indefinitely.

In other data, second-quarter productivity rose by 7.3%, while unit labor costs jumped 12.2%. Economists were looking for a 1.4% productivity rise and an 8.7% rise in costs.

July industrial production saw a 3% rise, topping forecasts for an increase of 2.7%, though the index remains far below pre-pandemic levels. Capacity utilization last month rose to 70.6% from 68.5% in June, versus expectations for a reading of 70.5%.

An initial reading on the University of Michigan's August consumer sentiment index came in at 72.8 compared with expectations for 72.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,090.73
-566.69 -2.05%
Volume: 79.76M
Sept. 21, 2020 9:57a
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/zigman2/quotes/210599714/realtime
US : S&P US
3,263.36
-56.11 -1.69%
Volume: 418.57M
Sept. 21, 2020 9:57a
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,659.54
-133.74 -1.24%
Volume: 584,566
Sept. 21, 2020 9:57a
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