The S&P 500 fell Friday as concerns around the U.S. economy dampened investor sentiment.
The Dow Jones Industrial Average dropped 8.89 points lower, or 0.03%, to close at 33,300.62. The Nasdaq Composite fell 0.35%, ending the day at 12,284.74. The S&P 500 slipped 0.16%, closing at 4,124.08.
A preliminary reading on the University of Michigan's consumer sentiment index fell to a six-month low of 57.7. Economists polled by the Dow Jones expected a May reading of 63.0. The survey also showed the outlook for inflation over the next 5 years climbed to 3.2%, tying the highest clip since June 2008.
Investors are also keeping an eye on Washington as concern around debt ceiling negotiations persisted. CNBC reported that a debt ceiling meeting between President Joe Biden and congressional leaders that was set for Friday was postponed to next week.
"None of the sectors are making convincing moves in either direction, reflecting a general lack of conviction in the market," said Joe Cusick, portfolio specialist and senior vice president at Calamos Investments.
The S&P 500 and Dow fell for a second consecutive week, down 0.29% and 1.11%, respectively. The Nasdaq gained 0.4%.
In the world of regional banks, PacWest fell 2.9%. PNC lost roughly 1%, and Zions Bancorporation closed 1.1% lower. On Thursday, regional banks dropped after PacWest said its deposits fell sharply last week.
Meanwhile, weaker-than-expected wholesale prices data issued Thursday, a sign of easing inflation, failed to shield investors from ongoing concerns of a downturn — particularly as a handful of stocks continue to carry the market.
Import prices were 0.4% month over month in April, the Bureau of Labor Statistics said Friday, marking the first rise so far in 2023. Economists polled by Dow Jones were expecting a 0.3% rise last month, compared to the decline of 0.8% the prior month.
Correction: Import prices declined 0.8% in March. An earlier version of this story misstated the figure.
Stocks close lower Friday
The Nasdaq Composite slid 0.4%, while the Dow lost 0.03%, or about 9 points. The S&P 500 fell 0.2%.
Stocks started the session higher, but quickly reversed course after disappointing consumer sentiment data hit a six-month low of 57.7. Economists polled by Dow Jones had forecasted a reading of 63 for May.
Import prices also climbed 0.4% last month, data from the Bureau of Labor Statistics said Friday. Economists polled by Dow Jones predicted import prices were 0.3% higher in April.
— Brian Evans
Bank of America remains bullish on Krispy Kreme following earnings report
Bank of America reiterated its buy rating on Krispy Kreme after the company beat Wall Street expectations for its first quarter.
On Thursday, the donut maker reported 9 cents in earnings per share and $419 million in revenue, while analysts polled by StreetAccount anticipated 7 cents per share on $402.1 million in revenue. The company also reaffirmed expectations for full-year financial performance.
Bank of America analyst Sara Senatore said the quarterly report was "strong," adding she was particularly impressed by expectations for growth in the U.S. and abroad. In addition to reiterating her buy rating, she increased her target price for the stock by $2 to $20. Senatore's new target implies the stock could rally about 32% over the next year from where it finished Thursday's session.
The stock has added about 1% in Friday's session.
— Alex Harring
Debt ceiling impasse threatens the 'basic building block' of the U.S. financial system, says Comerica
Comerica Bank's chief economist Bill Adams says May's bigger-than-expected drop in consumer sentiment is a likely reflection of Americans' concerns about the ongoing debt ceiling debate.
"This is also apparent in the National Federation of Independent Business's Small Business Optimism Index, which fell to a ten-year low in April," Adams wrote in a Friday note. "Not coincidentally, the last time small business sentiment was this weak was when the federal government went over the fiscal cliff in early 2013."
The economist noted the large downside risks posed by the impasse over negotiations regarding the debt ceiling, which has led to large movements in Treasury yields over the past few weeks.
"Bonds issued by the Treasury are a basic building block of the American financial system. Nobody can predict what happens if those blocks all crack at the same time," Adams said. "In Washington's past fiscal games of chicken, sentiment recovered within a few months of the crises ending. On the other hand, if the government defaults, it won't be pretty."
— Hakyung Kim
Walmart+ hits record membership, according to Morgan Stanley survey
Walmart's membership program has hit about 20 million customers, or roughly 15.5% U.S. households penetration, according to Morgan Stanley. In addition to being a record high for the program, called Walmart+, it's also a fifth straight increase from the firm's previous survey from early April.
"While a lower estimate than our prior one, our build still suggests Walmart+ fees could account for ~4-5% of total Walmart US EBIT in F'24 and drive ~20% of overall US EBIT growth in F'24 (though a caveat is this doesn't account for the higher costs to serve members)," the firm said in a note Thursday.
— Tanaya Macheel
Gold still makes a good hedge for investors, Bank of America says
Gold is on pace for a weekly decline, even as the S&P 500 and the Dow Jones Industrial Average limp through into the weekend – but the precious metal still has a place in investors' portfolios over the long term.
"After a decade of [quantitative easing] pushing bonds, alternatives and equities higher in tandem, gold still offers stable diversification benefits and plays an important role in efficient portfolios," said Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America.
Gold has outperformed after "incomplete" Fed rate-hiking cycles, she noted, adding that geopolitical tensions and sanctions could spur investors' interest in the precious metal's hedging capabilities.
Wolfe Research downgrades Disney as direct-to-consumer growth struggles
Wolfe Research downgraded shares of Disney to peer perform, citing slowing growth within the company's direct-to-consumer business and linear TV segment.
"DTC plan for > subs, > prices and < cost seems like cognitive dissonance," wrote analyst Peter Supino in a Friday note to clients.
Read more on the downgrade from Wolfe Research here.
— Samantha Subin
Regional banks 'not out of the woods,' portfolio manager says
This week's inflation data that showed price categories like used cars turning higher again is a reminder that regional banks can't count on Fed rate cuts to help repair their balance sheets, said Brian Mulberry, a client portfolio manager at Zacks Investment Management.
"We're not out of the woods yet. Regional banks still need to be prepared for what the new high cost of capital looks like. ... Any bank can be brought down by an emotional reaction and a run on deposits," Mulberry said.
The portfolio manager said that his team still owns some of the larger regional banks, like Fifth Third, but has been trimming some of the smaller names in the group.
The SPDR S&P Regional Banking ETF (KRE) was down less than 1% in midday trading.
— Jesse Pound
Wells Fargo downgrades Fox
Stocks making the biggest midday moves
Here are some of the names making the biggest moves in midday trading:
- First Solar — The stock soared nearly 24% after the solar company announced the acquisition of Evolar AB for up to $80 million. First Solar said move should accelerate its development of next-generation photovoltaic technology.
- News Corp — Shares jumped nearly 7% after the media company reported an earnings and revenue beat for its fiscal third quarter after the bell Thursday, according to FactSet. News Corp also said it expects to save an annualized $160 million by the end of 2023 through its previously announced job cuts.
- Robinhood — Shares shed about 7%. It's a reversal from Thursday's 6.4% gain, which came a day after Robinhood reported a first-quarter earnings and revenue beat. On Friday, Morgan Stanley said Robinhood's new 24-hour trading won't provide any material lift for the company's financials.
For more stocks making moves in midday trading, read the full story here.
— Michelle Fox
Strategas' Dan Clifton says we're entering an age of 'austerity'
We're entering an age of "austerity," according to Daniel Clifton, head of policy research at Strategas.
"This is really the first of a multi-period of austerity that we're going into," Clifton said Friday on "Squawk on the Street." "This is the first time ... in 35 years that we have a rising debt servicing cost. So we've been able to cut taxes, increase spending, do it without increasing our debt servicing costs, and that free lunch is over."
Clifton made his remarks amid ongoing concerns of debt ceiling negotiations. On Friday, the Congressional Budget Office said tax revenues and emergency measures can help the U.S. avoid a default in July should the Treasury successfully wade through challenges in June. However, it also reiterated that the risk of default next month remains.
— Sarah Min
17 S&P 500 stocks reach fresh highs
Seventeen stocks in the S&P 500 reached fresh highs on Friday, with many trading at all-time highs. Food companies were among the notable names.
New S&P 500 52-week highs:
- O'Reilly Auto trading at all-time high levels back to its IPO in April 1993
- PulteGroup trading at all-time highs back to its IPO in 1972
- General Mills trading at all-time highs back to when it began trading on the NYSE in 1928
- Pepsico trading at all-time highs back to Pepsi-Cola's merger with Frito-Lay in 1965 to form Pepsico
- First Solar trading at levels not seen since September 2008
Meanwhile, there were 11 stocks reaching 52-week lows:
- Match Group trading at all-time lows back to its IPO in November 2015