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The Dow Jones Industrial Average fell Friday, but was headed for a positive week, as investors assessed a weak retail sales report that dented enthusiasm around a stronger-than-expected start to corporate earnings.
The 30-stock Dow dropped 191 points, or about 0.6%. The S&P 500 fell 0.4%, while the Nasdaq Composite slid 0.4%.
The Dow, however, was headed for its fourth-straight positive week. The S&P 500 and the Nasdaq, meanwhile, were on pace for their fourth positive week in five.
Advance retail sales in March showed consumer spending fell twice as much as expected. Retail sales declined by 1% last month, more than the 0.5% fall expected by economists polled by Dow Jones, in part because consumers paid less for fuel.
“Retail sales came in weaker than expected, but a lot of the miss had to do with lower gas prices, which all things being equal is a slight positive for spending,” wrote Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
“Inflation has been coming down as gas prices have been coming down, but that can reverse in an instant, which would drive the headline numbers higher. What is more concerning is that core (which excludes food and gas prices) has been stubbornly high – and where we believe the risks to higher-rates-for-longer lie,” Zaccarelli added.
The disappointing retail sales data offset excitement around strong corporate earnings. JPMorgan Chase reported record revenue that beat analyst expectations, with the stock rising more than 7%. Wells Fargo shares briefly rose as much as 2.1% after reporting growing profits, before declining about 0.4%. These were the first bank earnings since the collapse of Silicon Valley Bank and Signature Bank last month.
Elsewhere, UnitedHealth, which has the biggest weighting in the Dow, fell as much as 3.4% after what Mizuho described as a “modest beat and raise,” and after UnitedHealth said it’s spending more for new diabetes and weight loss drugs from Novo Nordisk and Eli Lilly.
Meanwhile, Boeing fell about 6% after the aircraft maker warned of delivery delays for some of its 737 Max planes.
Expectations for this earnings season are downbeat. Analysts polled by Refinitiv expect S&P 500 earnings fell more than 5% in the first quarter. That forecast comes as companies deal with persistent inflation and higher rates.
“The bar has never been set lower,” said Art Hogan, chief market strategist at B. Riley Financial. “My guess is with consensus expectations for the S&P 500 to show earnings that are down some 5%, that may well be overstating what we actually find out.”
“I think that what’s going to be super important is the kind of guidance we get, and how confident that corporations will be in guiding for the next three quarters in the face of what likely will be a slower economy.”
Investors also assessed two back-to-back reports this week signaling cooling inflation. The March producer price index, a measure of prices paid by companies, declined 0.5% from the prior month, even as economists polled by Dow Jones expected prices to stay the same. Excluding food and energy, the index shed 0.1% from the prior month, while economists estimated a 0.2% month-to-month increase.
The PPI, which is considered a leading indicator of consumer inflation, bolstered a trend of easing inflation seen in the March consumer price index report released Wednesday. Consumer prices grew 5% on an annual basis, which was the smallest year-over-year increase in nearly two years.
