U.S. equities ended the trading day mixed, with a decline in crude oil prices pressuring the energy sector while investors also weighed a disappointing Chinese trade report, better-then-expected German factory orders, and a pull-back in the Japanese yen from its recent run. Treasuries were modestly higher in the midst of an empty domestic economic calendar, as was the U.S dollar while gold prices tumbled.
The Dow Jones Industrial Average (DJIA) declined 35 points (0.2%) to 17,706, the S&P 500 Index gained 2 points (0.1%) to 2,059, and the Nasdaq Composite was 14 points (0.3%) higher at 4,750. In moderately heavy volume, 945 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil fell $1.22 to $43.44 per barrel, wholesale gasoline lost $0.04 to $1.44 per gallon, and the Bloomberg gold spot price tumbled $24.14 to $1,265.85 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 94.11.
Tyson Foods Inc. (NYSE:TSN $68) reported fiscal 2Q earnings-per-share (EPS) ex-items of $1.07, above the $0.95 FactSet estimate, as revenues declined 8.1% year-over-year (y/y) to $9.2 billion, topping the expected $9.0 billion. TSN raised its full-year earnings outlook while forecasting a y/y increase in domestic protein production, which could pressure pricing, and moderate export growth. TSN was nicely higher.
LendingClub Corp (NYSE:LC) (LC $5) tumbled over 34% after the company announced the resignation of its Chairman and Chief Executive Officer (CEO), following an internal review of sales of $22 million in near-prime loans to a single investor, "in contravention of the investor's express instructions as to a non-credit and non-pricing element." LC noted that it will file an extension request with the Securities Exchange Commission (SEC) to file its quarterly report, as it took remediation steps to resolve the material weaknesses in internal control over financial reporting identified in 1Q. The announcement of the resignation of its CEO came as the company matched the Street's 1Q EPS forecasts and topped revenue expectations.
Meanwhile, shares of Krispy Kreme Doughnuts Inc (NYSE:KKD). (KKD $21) jumped nearly 25% after the company announced an agreement to be acquired by JAB Beech Inc. for $21.00 per share in cash, or a total equity value of about $1.35 billion.
Economic front dormant ahead of reads on the consumer
Treasuries were slightly higher, with the U.S. economic calendar void of any major releases today. The yields on the 2-Year and 10-Year notes declined 2 basis points (bps) to 0.71% and 1.76%, respectively, while the 30-Year bond rate ticked 1 bp lower to 2.62%.
This week's domestic economic front is poised to be headlined by data pointing to the health of the key U.S. consumer, with the releases of April retail sales and the preliminary University of Michigan Consumer Sentiment Index for May. Data on retail sales and consumer confidence suggest a still-cautious shopper, but we think these reports underestimate what is actually occurring, as some services and experience-type items aren’t included in those numbers. The trend may also be shifting as consumers appear to have slowed paying down their debt balances, potentially a positive development for spending, but still seem reluctant to increase their borrowing.
However, the week's economic docket will begin tomorrow with the release of the NFIB Small Business Optimism Index, forecasted to tick higher to a level of 93.0 for April from the 92.6 posted in March, as well as wholesale inventories, with economists predicting a 0.1% month-over-month increase during March following the 0.5% decline in February, while the JOLTS Job Openings report will round out the day, expected to show 5.45 million jobs were available to be filled in March, matching the prior month.
Europe mixed on data and energy weakness, Asia higher
European stocks finished mixed, amid some weakness in basic materials stocks on the heels of a disappointing Chinese trade report. Energy issues also fell with early gains for oil prices reversing after an initial boost on production disruptions in Canada due to the massive wildfire and reports that Saudi Arabia replaced its long-time oil minister. Also, weakness in the Italian banking sector on capital increase concerns and an analyst downgrade in the sector weighed on the markets. However, the global markets continued to digest Friday's softer-than-expected U.S April nonfarm payroll report that appears to be dampening Fed rate hike forecasts, while Japanese stocks snapped a losing streak as the yen weakened.
Moreover, sentiment may have found support from a stronger-than-expected read on German factory orders for March, which rebounded from February's drop. The euro was little changed versus the U.S. dollar while bond yields in the region traded lower.
Stocks in Asia finished mostly higher, despite a disappointing trade report out of China, as Friday's softer-than-expected U.S. April labor report appeared to dampen expectations of future Fed rate hikes. Also, oil prices gained ground to lend some support to the energy sector on production disruptions in Canada due to the massive wildfire and reports that Saudi Arabia replaced its long-time oil minister. Japanese equities rose, gaining ground for the first time in seven days, aided by some weakness in the yen. Mainland Chinese stocks dropped solidly following an unexpected decline in the nation's exports for April, which appeared to cause concern that the recent uptick in economic activity may be fading.
The report comes as the nation is set to deliver this week a plethora of key economic data for last month. Meanwhile, Australia's markets advanced with oil & gas and financials showing some strength to overshadow a decline in basic materials stocks, while Indian equities jumped on the dampened Fed rate hike expectations and on optimism regarding progress on the country's economic reforms, per Bloomberg. Finally, listings in Hong Kong moved to the upside, while those traded in South Korea declined.
Tomorrow's international economic calendar will offer CPI and PPI from China, trade data from Germany, industrial production from France and Italy, and import prices from the Eurozone.
Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab (NYSE:SCHW) & Co., Inc. The information contained herein is obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions.