Stock Market Forecast – Late Session Rebound is a Positive Sign Despite Lackluster Retail Sales

Stock prices were mixed on Thursday, as the Nasdaq and S&P 500 index rose, but the Dow Industrial dipped. The decline in the Dow was led by an 8.44% decline in Coca-Cola shares.  The energy sector buoyed stock prices for a second consecutive trading session, while financial where the largest drag, dropping 1.12% on the session. US futures took a turn for the worse before the opening bell, as a softer than expected US retail sales report quickly eroded short term sentiment. After the closing bell Nvidia, a semiconductor giant saw its shares surged in after-hours trading after the chipmaker beat on the top and bottom line. Stocks were down nearly 0.8% during the first hour of trading but rebounded to close mixed which is a positive sign.

Retail Sales Tumble Driven by Lower Gasoline and Department Store Sales

US Retail Sales came in softer than expected, and declined by 1.2% in December, according to the Commerce Department. It’s the largest drop since September 2009, which was the tail end of the great recession. Expectations were for a flat reading. The November headline number was revised lower to 0.1% from 0.2%. Gasoline sales tumbled 5.1% which was the driving factor. Department stores also contributed to the decline slipping 3.3%.

The core retail sales which exclude automobiles, gasoline, building materials, and food services, dropped 1.7% last month after an upwardly revised 1.0% surge in November. Overall the numbers where much softer than expected, which comes just a week before the beginning of the retail earnings season.

The Fed Takes Notice of the Softer than Expected Data

Federal Reserve Governor Lael Brainard, in an interview on CNBC, said she’s growing more concerned about economic growth. She said that she believes that the Fed will stop the-unwind of its balance sheet sometime this year. She is the first of the Fed governors to say that she believes in halting sales of bonds held in the Fed’s portfolio know as quantitative tightening. She took notice of the softer than expected retail sales and said it was only one data point but it was one to watch carefully.

Jobless Claims Confirmed a Soft Patch

Retail sales weren’t the only soft economic data point released on Thursday. The Labor Department reported that jobless claims increased to 239,000 in the week ended Feb. 9, which was above expectations. The four-week average increased to 231,750, the highest in a year.

Coke’s Shares Weigh on the Dow

Before the opening bell, Coke released soft financial results. Coke reported Q4 earnings that met expectations, but guidance for 2019 showed that earnings per share could rise or fall by 1% meaning less than the $2.08 per share it earned in 2018. Expectations were for earnings of $2.23 per share in 2019.

After the closing bell NVDA, a semiconductor giant reported EPS of $0.80 which beat estimates of a $0.77 per share. Revenue came in at $2.21 billion which was roughly in line with guidance. Nvidia gave revenue guidance for the current quarter of $2.2 billion, plus or minus 2%. The stock climbed approximately 9% in after-hours trading.