US Stock Market Overview – Stocks Rally Lead by Technology, Financials Buck the Trend

A rebound in crude oil lifts energy shares
David Becker
E-mini Dow Jones Industrial Average

US stock prices rebounded on Wednesday continuing to rebound after Monday downdraft. Prices started the trading session under pressure but rose slowly throughout the session. Softer than expected retail sales initially weighed on Futures prices but some calming words about the US/Mexican/Canadian Steel tariffs helped stock gain traction. Sectors were mixed, with Technology and Energy leading the large cap index higher, financial were the worst performers.

Soft Retail Sales Weigh on Growth Prospects.

Softer than expected retail sales spilled over into the economic growth projections which weakened substantially, and expectations for a rate cut over the next eight months increased. The Atlanta Fed’s GDPNow tracker is pointing to a 1.1% gain for the economy in the Q2. That comes on the back of a Q1 in the US which saw a 3.2% gain.

The downgrade came after US retail sales declined 0.2% in April, following a surge of 1.7% in March, according to the Commerce Department. The March figure was revised lower. Contractions in spending on clothing and applications reduced overall spending. Car sales dropped 1.1% last month and sales at electronics and appliance stores dropped 1.3%. Retail Sales are a key component of consumer spending which makes up 66% of US GDP. Sales at clothing stores fell 0.2% and plunged 1.9% at home and garden supply stores. Furniture store sales were unchanged. Even the category that includes online retailers dropped. Excluding the volatile auto and gas categories, retail sales also fell 0.2%.

Production Was Down in April

The Federal Rerserve reported that US industrial production fell in April, dragged by a big drop in factory output. Industrial Production dropped 0.5% in April after a 0.2% March gain. Industrial production fell 0.5% in February. Manufacturing output fell 0.5%, led by a 2.6% decline in motor vehicles and parts. Capacity Utilization fell a sharp 3.5%. Production at mines, a sector that also covers oil and gas drilling, rose 1.6%.

Oil Prices Rebound

Oil prices rebounded buoying energy shares. This followed the inventory report released by the Department of energy. The EIA reported that US crude oil inventories (increased by 5.4 million barrels from the previous week. Gasoline inventories decreased by 1.1 million barrels last week and are about 2% below the five year average for this time of year. Distillate fuel inventories increased by 0.1 million barrels last week and are about 4% below the five year average for this time of year. Total commercial petroleum inventories increased last week by 14.6 million barrels last week.

Denand was slightly lower. The EIA revealed that total products demand over the last four-week period averaged 20.1 million barrels per day, up by 0.3% from the same period last year. Over the last month gasoline demand averaged 9.4 million barrels per day, up by 0.5% from the same period last year. Distillate fuel demand averaged 4.0 million barrels per day over the past four weeks, down by 4.5% from the same period last year.

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