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S&P 500 posts first 5-day winning streak since September
PUBLISHED 12 HOURS AGO UPDATED MOMENTS AGO
Fred Imbert
@foimbert
CNBC.COM
Mark Tepper talks about market outlooks
Mark Tepper talks about market outlooks
Stocks rose on Thursday, but gains were capped as disappointing holiday sales from Macy's and a revenue guidance cut from American Airlines pressured retail and airline shares. Fear that the U.S. government shutdown might continue for a long time also pushed equities lower.
The S&P 500 climbed 0.4 percent — notching its first five-day winning streak since September — as the real estate and industrials sectors outperformed. The Dow Jones Industrial Average also posted a five-day winning streak, rising 120 points as Boeing outperformed. The Nasdaq Composite gained 0.4 percent.
Macy's shares tanked more than 18 percent — their worst day every — after reporting its same-store sales grew by just 1.1 percent in November and December. The company also cut its earnings and revenue forecast for fiscal 2018.
The sharp decline in Macy's dragged down the entire retail space. The SPDR S&P Retail ETF (XRT) dropped more than 1.5 percent. Shares of Kohl's fell 4.8 percent while Nordstrom declined 4 percent.
Meanwhile, American Airlines fell more than 4 percent after slashing its revenue growth forecast for the fourth quarter. Shares of JetBlue Airways and Southwest Airlines both fell.
Traders work on the floor of the New York Stock Exchange in New York, Monday, Dec. 24, 2018.
Seth Wenig | AP
Traders work on the floor of the New York Stock Exchange in New York, Monday, Dec. 24, 2018.
"The question is whether all of this has already been baked in," said Quincy Krosby, chief market strategist at Prudential Financial. "If the market can look past this, it will suggest that much of this has been baked in."
The announcements from Macy's and American Airlines came as the earnings season for calendar fourth-quarter 2018 is set to ramp up. J.P. Morgan Chase, Bank of America, BlackRock and Morgan Stanley are among the companies set to report next week.
Fourth-quarter earnings are expected to have risen nearly 15 percent on a year-over-year basis, but growth is expected to be much lower moving forward. According to Thomson Reuters, first-quarter earnings are forecast to rise by 3.9 percent.
"Earnings growth has taken a downturn, but it still remains positive," said Paul Springmeyer, head of investment at U.S. Bank Private Wealth Management. "While the pace of earnings growth is slowing, it is not going negative at this juncture."
Wall Street weighed the possibility of a prolonged U.S. federal government shutdown. Earlier on Thursday, President Donald Trump tweeted he would skip the annual World Economic Forum in Davos due to the shutdown.
"It's just a reminder of how utterly dysfunctional the federal government is," said Ward McCarthy, chief financial economist at Jefferies. "It just means it put potential progress on trade negotiations on the shelf, and the market didn't like that."
Thursday's moves down took place after delegations from Washington and Beijing ended three days of trade negotiations in China on Wednesday. China's commerce ministry said Thursday the negotiations were extensive and had helped set up a foundation for further talks. This week's face-to-face meetings were the first to take place since U.S. President Donald Trump and Chinese President Xi Jinping agreed to a 90-day truce last month.
If both sides are unable to secure a comprehensive trade agreement by March 2, Trump has said he plans to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports.
Stocks closed higher on Wednesday, with the S&P 500 notching its longest winning streak since September. The move higher added to the sharp bounce since the broad index briefly dipped into bear-market territory in late December. Since then, the S&P 500 is up nearly 10 percent through Wednesday's close.
"The power of the recovery rally in US and global equities has been impressive," Michael Shaoul, chairman and CEO of Marketfield Asset Management, wrote in a note to clients. "As encouraging as all of this has been to witness it does not change the fact that a sell-off of this magnitude does not happen in a vacuum."
"The decline marks a key downward-shift in the long technology driven bull market," Shaoul added. "There is simply no way to tell at present whether we have witnessed the completion of a brief but tumultuous sell-off."
Boeing shares rose more than 2.5 percent after Morgan Stanley upgraded them to overweight, citing strength in the company's commercial aerospace business.