Investors had plenty to think about ahead of the Thanksgiving holiday, chewing through a huge helping of economic data.
Kicking things off were weekly jobless claims – released a day early due to tomorrow’s holiday – which plunged to 199,000 in the week ended Nov. 20, well below last week’s 270,000 and economists’ forecast for 260,000 claims. What’s more, this was the lowest level for initial unemployment applications since 1969.
Also in focus were October’s personal income and spending data, which came in above estimates (up 0.5% and 1.3%, respectively, from September), and an upwardly revised reading on third-quarter gross domestic product (to 2.1% versus an initial estimate of 2.0%).
However, it wasn’t all roses. The University of Michigan’s consumer sentiment index arrived at its lowest level in 10 years in November and the core personal consumption expenditures (PCE) index – a key inflation measure used by the Federal Reserve – rose 4.1% year-over-year in October, the quickest annual pace since 1991.
Plus, the release of the minutes from the latest Fed meeting showed several members of the committee said the central bank “should be prepared to adjust the pace of asset purchases” and/or raise interest rates sooner than anticipated if inflation continues to run hot.
“In terms of the Fed’s economic outlook, it’s clear that inflation has accelerated more than anyone expected it to, and the breadth of rising prices has increased substantially,” writes Bob Miller, BlackRock’s Head of Americas Fundamental Fixed Income.
“While the bar for an acceleration in the tapering of asset purchases is high, it is not insurmountable and looks reasonably likely to be cleared should we see another solid payroll report and inflation data release in December,” he adds. “Accelerating the asset purchase tapering would potentially end purchases in March 2022 and would then open the door for the Committee to consider lift off from the zero policy rate sometime in the second quarter of the year.”
At the close, the S&P 500 Index was up 0.2% at 4,701 and the Nasdaq Composite had gained 0.4% at 15,845. The Dow Jones Industrial Average wasn’t as resilient, falling 0.03% to 35,804.
As a reminder, the U.S. stock market will be closed tomorrow for Thanksgiving and trading will end early on Black Friday.
Other news in the stock market today:
- The small-cap Russell 2000 gained 0.2% to 2,331.
- U.S. crude futures slipped 0.1% to end at $78.39 per barrel.
- Gold futures eked out a marginal gain to settle at $1,784.30 an ounce.
- Bitcoin retreated 0.7% to $57,453.50. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.)
- Gap (GPS) took it in the chin after earnings, with shares sliding 24.1%. In its third quarter, the clothing retailer reported adjusted earnings of 27 cents per share on $3.94 billion in revenue, well below the 50 cents a share and $4.43 billion in sales analysts were expecting. GPS also lowered its full-year forecast, citing rising freight costs and supply-chain disruptions due to factory closures in Vietnam. “In the third quarter, the Athleta and Gap brands continued to be the bright spots for GPS, as the brands have grown 48% and 8%, respectfully, compared to fiscal 2020,” says CFRA Research analyst Zachary Warring, who maintained his Hold rating on the stock while lowering his price target by $8 to $22. “The company reiterated its plan to open between 30 and 40 Old Navy stores and 20-30 Athleta stores in 2021 while closing 75 Gap and Banana Republic stores. We need to see how sales and margins hold up in fiscal 2023 to get more bullish on shares of GPS.”
- Supply-chain issues were also a noted in Nordstrom’s (JWN) quarterly update. “While many retailers are dealing with macro-related supply chain disruptions, Rack [the retailer’s off-price chain] faces a unique challenge as off-price procurement of the same top brands we carry at Nordstrom is particularly difficult in an environment with production constraints and lower levels of clearance product,” said CEO Erik Nordstrom in the earnings call. While Rack contributed to roughly 50% of total sales in 2019, he added, it’s only brought in 42% of sales for the year-to-date. Overall, the company reported earnings of 39 cents a share and revenue of $3.6 billion in its third quarter, missing analysts’ estimates for earnings of 57 cents per share and revenue of $3.5 billion. The stock plunged 29% today.
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