Recap: Stocks Lower After Retailers Post Sales Declines

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Despite opening higher after a weekly labor report beat expectations, markets closed in the red for a second consecutive day as retailers post lower results than anticipated.

The Nasdaq was leading the decline with a 1.00% fall to 1,973, followed by a 0.56% downturn in the S&P 500 to 997,  and the Dow moved 0.27% lower to 9,256.

An hour before markets opened, sentiment had turned optimistic after the weekly jobless claims report offered the first unambiguous glimpse of a slowdown in the decline of the labor market. Initial claims fell 38k in the week ending August 1 to 550,000.

“Now that the unemployment claims data are clear of the distortions of the summer auto shutdowns, it is encouraging to see initial claims at the 550,000 level at the end of July,” said analysts from RDQ Economics. 

The number of initial claims reached as low as 524k in the week ending July 11, but that data was unreliable, polluted as it was by seasonal issues. This week’s data is clean ― and the 4-week average to 555,250 draws a stark contrast from the weekly average of 616k claims in June (or 627k in May, 638k in April, and 658k in March).

However, the level of continuing claims rose to 6.310 million for the week ending July 26, an increase of 69k.

Markets shrugged off the continuing claims data, but yesterday’s sell-off was extended after retailers reported poor same-store sales for July: Costco Wholesale posted a 2% drop in sales across the US, and Target posted a 6.5% decline.

The networking and communications giant Cisco Systems also reported weak results, as its fiscal Q4 earning came in a 31 cents per share, down from 40 cents one year ago. Those results were, however, a bit better than anticipated, and CEO John Chambers was optimistic that recovery amongst small businesses would boost growth in future earnings.

In Real Estate news, a news release from Freddie Mac confirmed that mortgage rates fell across the US last week. 

The government-sponsored mortgage buyer said the average 30-year rate was 5.22% for the week ending August 6, in line with the MBA survey released yesterday.