| Friday's Headlines 1. US markets erase losses, but close lower for the week 2. US retail sales and manufacturing have largest one-month declines in history 3. Market breadth is not strong 4. What to expect next week Markets Closed
Year-to-Date
 Image credit: Charles Donaldson/EyeEm/Getty
Markets Today U.S. markets crawled back from early losses to close positive for the day. Still, it was the worst week for the DJIA and S&P 500 in two months. Sentiment shifted in the middle of last week, and stock investors have been playing from the baseline since then. The steady drumbeat of bad news is hard to battle through, and money flows suggest a further retreat from stocks into bonds and money market funds. Money market funds hit yet another all-time record.
The economic reopening is underway, but the virus has yet to be contained. Of the 39 U.S. states that have started to reopen, 10 are seeing a rising growth rate of infections. Add that to the worst monthly retail sales and industrial manufacturing reports ever recorded in the U.S. economy, and it's hard to see the upside in equity markets in the near term.
Hopes for a swift V-shaped economic recovery are dissipating as economies around the world start to open. The GDP Now Report from the Atlanta Federal Reserve Bank is projecting a 42% drop in second quarter U.S. GDP. That may be the bottom here in the U.S. China has already bounced, as has Europe, but our trajectories don't look like V's at all.
This will take time.  Headlines:
 Retail Sales Historic Plunge U.S. retail sales for April were more terrible than expected, if that's possible. Sales fell 16.4% on a seasonally-adjusted basis, and 20% from the same month last year, the worst decline in the Commerce Dept.'s records.
Spending plunged everywhere, including vehicle purchases, gas, and on food and drinks at bars and restaurants, as expected. But nearly every other category suffered too, as people lost their jobs, commuters worked from home, and malls remained shuttered.
Non-essential businesses were particularly hard hit as sales at furniture stores dropped 58.7% and electronics fell 60.6%. Clothing sales plummeted 78.8% from March.
The Amazon Effect Of course, there was one category where sales climbed, and one company that was the principal beneficiary.
Non-store retailers, which includes online retailing giants, saw a 8.4% spike. Amazon accounts for about 40% of that category, according to analysts. It was the only retailer benefitting from the surge in e-commerce, to be sure. Target said digital sales were up 275% month-to-date, while Best Buy said domestic online sales jumped 250%.  chart courtesy YCharts
Uneasy Markets Even with the two relief rallies we have seen in the U.S. stock market to end the week, you can't deny the uneasiness among investors. We see it in our Anxiety Index, through our recent reader survey, by watching money flows, and by looking at market breadth.
Indeed, institutional investors feel the market's next direction is down, not up, according to a recent survey by Evercore ISI.  chart courtesy ISI Evercore
Weak Breadth Apart from the fact that more than 20% of the S&P 500 market cap is concentrated in the FAANG stocks, the breadth of the market has been paltry. The median U.S. stock is lower by -3.5% since April 9th, and 58% of the Russell 3000 components are lower since then. The S&P 500 and the Russell 3000 are both up 2.5% since then.
It's a market of stocks, but very few are driving right now. What to Expect Next Week Here's a look at how different asset classes have been performing:  Here's a list of economic events for the week ahead:
Sunday, May 17th:
Monday, May 18th:
Tuesday, May 19th:
Wednesday, May 20th:
Thursday, May 21st:
Friday, May 22nd:
PBOC Rate Announcement and FOMC Minutes
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(chart courtesy YCHARTS)  Department store stocks, such as Nordstrom (7%), Gap (6%), and Kohl's (nearly 5%), are all higher today despite the aforementioned drop in retail sales last month. Royal Caribbean's stock price rose by 6% after the cruise line raised longer-term, high-yield debt in order to boost its liquidity.  Shares of VF are down by over 6% amid the apparel and footwear company's Q4 earnings missing estimates. Semiconductor stocks, including Lam Research and KLA, fell following the Trump administration's decision to place export restrictions on shipments of semiconductor chips to Huawei Technologies. Word of the Day Consumer SentimentConsumer sentiment is a statistical measurement and economic indicator of the overall health of the economy as determined by consumer opinion. Consumer sentiment takes into account an individual's feelings toward their current financial health, the health of the economy in the short-term, and the prospects for longer-term economic growth.  photo courtesy David Burns
Today in History May 15th, 1911: The Supreme Court upholds the U.S. government's decision to break up John D. Rockefeller's Standard Oil Co. on the grounds that it is such a powerful monopoly that it violates the "rule of reason."
Ron Chernow, Titan: The Life of John D. Rockefeller, Sr. (Random House, 1998), pp. 554–555.
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Friday, May 15, 2020
Retail Wreckage
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