Stock markets in the United States declined as investors resumed selling their stakes in small cap and technology companies.
Today the Department of Labor’s Bureau of Labor Statistics reported that wholesale prices rose significantly in April. The producer price index showed that the prices of goods and services purchased by companies increased 0.6%. On an annual basis, wholesale prices climbed 2.1% last month, the highest 12-month increase in more than two years. It is also close to the Federal Reserve’s 2% inflation rate target.
In an email to clients, Chris Rupkey, an economist at Tokyo-Mitsubishi wrote, “Inflation is back and this can only mean one thing. Slack in the economy is evaporating more quickly now as the economy gets closer to full employment. “Bet on it. Inflation isn’t dead. We found some in today’s PPI report.”
Yesterday the Department of Commerce reported that the growth rate of retail sales retreated from a 1.5% increase in March to just 0.1% last month.
With regard to the movement of the stock markets, Bill Schultz, chief investment officer at McQueen Ball & Associates, told Bloomberg in a telephone interview that the “market is taking a bit of a breather.” He also noted that corporate earnings are okay. He added, “Now we’re in a slow period. We’re going to have to see earnings pick up to get us to the next level on stocks.”
On the other hand, Joe Bell, a senior equity analyst at Schaeffer’s Investment Research, said, “There’s potential for people to take profits as we reach this record-high area. When you get these run-ups, people start to look at economic data, and we haven’t exactly had a great run over the last month. People were expecting a pickup following a tough winter.”
- Dow Jones Industrial Average (DJIA)- 16,616.25 (-0.59%)
- S&P 500- 1,888.22 (-0.49 %)
- NASDAQ- 4,100.56 (-0.72%)
- Russell 2000- 1,103.82 (-1.55%)
- EURO STOXX 50 Price EUR- 3,210.42 (-0.04%)
- FTSE 100 Index- 6,878.49 (+0.08%)
- Deutsche Borse AG German Stock Index DAX- 9,754.39 (-0.00%)
- Nikkei 225- 14,405.44 (-1.14%)
- Hong Kong Hang Seng Index- 22,528.77 (+1.03%)
- Shanghai Shenzhen CSI 300 Index- 2,172.37 (-0.11%)
Stocks in Focus
The stock price of Deere & Company (NYSE:DE) declined 2% to $91.70 per share despite higher-than-expected profits of $980 million or $2.65 per share. The consensus estimate of analysts polled by Thomson Reuters I/B/E/S was $$2.48. Its revenue was $9.95 billion. The company’s shares declined because it forecast that equipment sales will decline by around 4% this year.
Fossil Group Inc (NASDAQ:FOSL) declined more than 10% to $100 per share after the company issued a weak outlook for the second quarter. The designer of timepieces and accessories estimated that it will be able to achieve earnings in the range of 90 cents to 97 cents per share and revenues between $762 million and $832 million. Wall Street analysts expected the company to generate $1.11 per share in earnings on revenues of $773.2 million for the second quarter.
Following the steep decline of Fossil Group’s stock price, an exit trigger was sent by an equity risk management firm. The stock entered an elevated risk state, which implies the possibility of continued decline.
Shares of Sears Holdings Corp (NASDAQ:SHLD) dropped more than 5% to $40.70 per share after the company disclosed that it is exploring strategic alternatives for its 51% stake in Sears Canada Inc (TSE:SCC). It is considering a potential divestiture of its remaining stake.