The S&P 500 hit another all-time high on Thursday. Stocks rallied and then traded in a narrow range after we got a slew of economic data on housing, employment, and manufacturing that all missed economists’ expectations.
First, the scoreboard:
- Dow: 18,287.14, +1.74, (0.01%)
- S&P 500: 2,130.45, +4.60, (0.22%)
- Nasdaq: 5,089.21 +17.47 (0.34%)
And now, the top stories on Thursday:
- Lumber Liquidators CEO Robert Lynch “unexpectedly” quit, the company announced this morning. Shares collapsed more than 15%. The hardwood flooring retailer said founder/chairman Tom Sullivan would serve as interim CEO while it searches for a replacement. Daniel Terrell, the company’s CFO, will leave on June 1. A March 1 investigation by CBS’ “60 Minutes” alleged that the company’s flooring sourced from China contained toxic levels of formaldehyde. The company is under a federal investigation. Hedge fund manager Whitney Tilson, who was interviewed on the episode and is short the stock, said Lynch wouldn’t have resigned if there wasn’t a formaldehyde problem.
- And now for the data: Existing home sales plunged in April. Sales fell 3.3% month-over-month to an annualized rate of 5.04 million. Economists had expected sales of +0.8% month-on-month to an annualized rate of 5.23 million.
- Initial jobless claims rose slightly to 274,000 last week, missing the expectation for 270,000. This initial claims reading, however, pushed the 4-week moving average of claims to another 15-year low. In a note to clients, economists at BNP Paribas said, “Despite a string of disappointing activity data, we continue to get signs that the labour market remains resilient.”
- The latest preliminary reading on manufacturing activity from Markit Economics showed activity slowed in May, with the latest PMI coming in at 53.8. Expectations were for the reading to come in at 54.5, up from 54.1 the prior month. “Manufacturers reported their weakest growth since the start of 2014 in May, with the survey results adding to fears that the strong dollar is weighing on the US economy and hitting corporate earnings,” wrote Chris Williamson, chief economist at Markit Economics.
- And lastly in data, the latest reading on manufacturing activity from the Philadelphia Federal Reserve fell to 6.7 in May from 7.5 in April. Expectations were for a reading of 8. From the release: “Employment increased at the reporting firms, but the employment index moderated compared with April. And, Barclays economists wrote in a client note: “On balance, we see the May Philly Fed index as consistent with last week’s Empire State survey, which together suggest a tepid pace of expansion for Northeast manufacturing in Q2.”
- West Texas Intermediate crude oil jumped 3%, back above $US60 per barrel. Data released by the Energy Information Administration showed that crude inventories fell by 2.7 million barrels last week: The third straight period of declines. Brent crude, the international benchmark, rose 2%. Earlier this week, we highlighted comments from Morgan Stanley noting that following the oil crash, drillers are prioritising profitability over their output of barrels.
- Best Buy shares rallied by up to 4% after reporting a beat on earnings and revenues in the first quarter. The consumer electronics company reported earnings per share of 37 cents (versus estimates of 29 cents,), and revenues of $US8.56 billion (versus forecasts for $US8.46 billion.) International sales fell 22.1% due to foreign currency movements, and weakness in Canada’s consumer electronics industry.
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