NVDA NVIDIA Corporation

By Ellie Ismailidou and Barbara Kollmeyer, MarketWatch

Retail sales jump, consumer confidence rebounds

U.S. stocks were in negative territory Friday, after a strong report on U.S. retail sales did not assuage investor worries about the battered sector, while a drop in oil prices weighed on risk appetite.

The S&P 500 was down 5 points, or 0.3%, to 2,058, led by a 0.7% drop in energy shares, which were weighed by a decline in oil prices. Technology and health-care stocks were the two sectors in positive territory, both up 0.2%.

The Dow Jones Industrial Average fell 58 points, or 0.3%, to 17,663, weighed by a 3.1% drop in Wal-Mart Stores Inc.(WMT) and boosted by a 0.9% gain in Apple Inc.(AAPL)

The Nasdaq Composite was moving in and out of positive territory, boosted by the tech rally, but last traded up 8 points, or 0.2%, at 4,745.

Stocks initially moved higher, following news that sales at U.S. retailers jumped 1.3% in April to mark the biggest gain in a year. Auto dealers, gas stations and online vendors spearheaded the increase, which exceeded economists' expectations of an 1% rise. (http://www.marketwatch.com/story/retail-sales-leap-13-in-april-2016-05-13)

Meanwhile, consumer sentiment surged in early May (http://www.marketwatch.com/story/consumer-sentiment-pops-as-income-gains-lead-to-rosier-views-of-the-future-2016-05-13)as Americans' views of the future brightened. And U.S. producer prices rose 0.2% in April (http://www.marketwatch.com/story/us-producer-prices-climb-02-in-april-2016-05-13) after two straight declines, but inflation at the wholesale level remained largely absent in the broader economy.

Investors initially welcomed the strong retail-sales reading after a flurry of disappointing news in that sector this week, with flagship retailers such as Macy's Inc.(M) and Kohl's Corp.(KSS) delivering weaker earnings reports and downgraded 2016 forecasts.

But soon after the opening bell "the market took that smile and turned it upside down," said Kim Forrest, senior portfolio manager at Fort Pitt Capital. Consumer-discretionary stocks, which mainly include retailers, were down 0.6% on the day and 0.9% over the week--the worst weekly performance on the S&P.

According to Forrest, Friday's data failed to assuage investors' worries about the future of traditional retailers, particularly as they are falling flat in the battle for apparel sales (http://www.marketwatch.com/story/traditional-retailers-stumble-in-their-efforts-to-compete-with-amazon-2016-05-12) against e-commerce juggernaut Amazon.com Inc.(AMZN), as is evident in their recent earnings.

"We have quite the contradiction between what many U.S. retailers said this week about the macro landscape and today's April retail sales figure," said Peter Boockvar, chief market analyst at The Lindsey Group, in emailed comments.

According to Boockvar, the discrepancy points to a story of "shifting channels" rather than slowing sales, as the numbers showed "quite a difference between online and department stores."

Also weighing on risk appetite was the fact that crude oil prices (http://www.marketwatch.com/story/oil-price-rally-fades-as-oversupply-fears-crop-up-again-2016-05-13) moved lower, with West Texas Intermediate down 1.6%, after comments from Russian Energy Minister Alexander Novak drew attention. He told reporters on Thursday he doesn't see the oil market balancing out until the first half of 2017, Reuters reported.

Oil prices rallied Thursday after an International Energy Agency report said declines in global production will ease a crude supply glut. A reading on North America's oil-rig count is expected Friday afternoon.

Fed worries: There were also those who worried that Friday's data could bolster the Federal Reserve's case for raising interest rates twice this year.

Investors get jittery thinking that "a rate hike might come sooner," said John Conlon, chief equity strategist at People's United Wealth Management, but added that these fears coul be overstated, as one strong reading would not be enough to shift the Fed's policy of a go-slow approach to rate hikes.

Indeed, on Friday, comments from Fed Chairwoman Janet Yellen were on the cautious side. In a letter to Rep. Brad Sherman (D., Calif.) (http://www.marketwatch.com/story/feds-yellen-says-negative-rates-would-need-careful-consideration-2016-05-13) released by his office on Thursday, she said the central bank wouldn't rule out using negative interest rates, but such a move would require careful consideration.

San Francisco Fed President John Williams will speak to the Sacramento Economic Forum in Sacramento, Calif., at 6:25 p.m. Eastern Time.

Stocks to watch:J.C. Penney Co. Inc.(JCP) was down 0.6% after the company missed quarterly sales estimates (http://www.marketwatch.com/story/jc-penney-shares-tumble-after-weak-sales-fall-short-of-estimates-2016-05-13) as same-store sales fell way below expectations.

Nordstrom Inc.(JWN) shares plunged 13% after the retailer reported lower-than-expected first-quarter sales (http://www.marketwatch.com/story/nordstrom-shares-plunge-after-revenue-eps-miss-2016-05-12) and earnings.

Nvidia Corp shares climbed 12.4% after the company's profit rose 46% in the latest quarter as the chip maker saw strong growth (https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=8&cad=rja&uact=8&ved=0ahUKEwj_q-v3gtfMAhWC4yYKHd2RA3oQqQIIMTAH&url=http%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fnvidia-shares-rally-5-after-earnings-outlook-top-street-view-2016-05-12&usg=AFQjCNHU-3P5jnI19CcJkml2qm_KcG_TpQ&bvm=bv.122129774,d.eWE) in gaming products as well as newer sectors like automotive "infotainment."

Shake Shack Inc.(SHAK) shares gained 4.5% after the company swung to a better-than-expected profit for its first quarter, boosted by strong same-store sales (http://www.marketwatch.com/story/shake-shacks-strong-same-store-sales-boost-profit-2016-05-12) and new location openings, leading the chain to raise its annual guidance.

Apple(AAPL) gained 0.9% after the iPhone maker announced late Thursday (http://www.marketwatch.com/story/apple-puts-1-billion-into-chinas-uber-rival-didi-2016-05-13) that it will invest $1 billion in Didi Chuxing Technology Co., China's homegrown competitor to Uber Technologies Inc.

U.S.-listed shares of Royal Dutch Shell PLC(RDSB.LN) (RDSB.LN) (RDSB.LN) (RDSB.LN) fell 2.2% in New York after an estimated 2,100 barrels of crude leaked from a Royal Dutch Shell facility in the Gulf of Mexico Thursday (http://www.marketwatch.com/story/shell-shuts-well-after-leak-into-gulf-of-mexico-2016-05-12).

Other markets: Asian markets (http://www.marketwatch.com/story/oil-volatility-unsettles-asian-markets-nikkei-set-for-around-2-weekly-gain-2016-05-13) finished Friday lower, with markets rattled by oil-price volatility. The Nikkei 225 index dropped 1.4%, though it finished the week nearly 2% higher. The Shanghai Composite Index lost 0.3% on the day, but posted a nearly 3% drop for the week.

European stocks were mixed (http://www.marketwatch.com/story/european-shares-push-lower-heading-for-third-straight-weekly-drop-2016-05-13) after a rough week on the earnings front. Gold prices fell 0.4% to $1,265.8 an ounce.

The dollar (http://www.marketwatch.com/story/dollar-slips-as-market-looks-ahead-to-next-weeks-g-7-2016-05-13) gained against the yen and the euro following the strong data.

Read: Investors' appetite for gold is soaring, and there is little sign of a slowdown (http://www.marketwatch.com/story/investor-appetite-for-gold-is-soaring-and-theres-little-sign-of-a-slowdown-2016-05-12)

(END) Dow Jones Newswires

May 13, 2016 11:13 ET (15:13 GMT)

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