MANHATTAN (CN) — From retail sales to industrial production, a number of “worst-ever” reports dragged markets down Friday morning, but investors fought back to close out the day barely ahead.
After posting a 175-point drop at the morning bell, the Dow Jones Industrial Average finished the day’s gaining 60 points, barely a 0.25% increase. The S&P 500 and Nasdaq, which earlier had each fallen by about one percentage point, finished Friday on a slightly more positive note, gaining 0.4% and 0.79%, respectively. The Dow, at 23,685 points, is now roughly in the same spot as a month ago when it started the second week of April at 23,698 points.
Investors throughout the day were battered by several dire economic indicators and reports.
The worst, though likely the most expected, came out midday from the Federal Reserve Bank of Atlanta, which forecast gross domestic product to drop nearly 43% through June, one of the worst since the Great Depression. Similar data a week ago indicated a drop of only 35%.
The forecast, which is not an official forecast by the Atlanta Fed, does not take into account the impact of Covid-19 on other economic reports other than its direct impact on GDP.
More bad news hit investors on Friday as industrial production fell 11.2% in April, the largest monthly drop in more than century, according to a report by the Federal Reserve. All market sectors saw a drop in production, but some suffered worse than others. Manufacturing fell by 13.7% and automakers reported a 70% decrease in the production of motor vehicles and auto parts, the report found.
Retail sales also fell more than 16% last month, according to data from the Commerce Department released Friday, a larger drop than most economists had predicted. Combined with the 8% drop in retail sales from March — when stores were still open for the first half of the month — retail has suffered the largest two-month drop in sales since the survey began in 1953.
Wall Street is banking on April being the trough for retail sales, hoping that, as states reopen and stores welcome customers back, sales will creep back up. However, some worry about consumers feeling safe enough to patronize stores at the same rate as they did before the pandemic struck.
Retail has already taken the brunt of the economic downturn, with luxury retailer Neiman Marcus filing for bankruptcy earlier this month, as did J. Crew. The next chip to fall was J.C. Penney, which filed Chapter 11 bankruptcy Friday afternoon.
Back in February, the Texas-based retail company’s last earnings release reported only $25 million in income before taxes, a 60% drop from the $63 million the company made during the same period the year before. A month later, J.C. Penney announced it would temporarily close its stores following stay-at-home orders in several states.
Meanwhile, investors are hoping for a nugget of good news may have gotten it from the University of Michigan, whose consumer sentiment index showed that confidence in the U.S. economy has inched upwards.
The survey showed that preliminary consumer sentiment for May rose slightly over April, from 71.8 to 73.7, well above the 68 points many analysts had predicted. Richard Curtin, the chief economist on the survey, wrote the uptick was due to the recent stimulus checks and “widespread price discounting” that have helped boost consumer buying attitudes.
While the survey found consumers don’t largely expect an economic restoration any time soon, Americans of all political stripes were more hopeful about current economic conditions than a month ago, with Democrats increasing by more than 10 points, independents by about 8 points, and Republicans by almost 5 points.
Some investors disregard the consumer sentiment index, saying Wall Street is focused instead on additional fiscal policy from Capitol Hill. “At this point, the U.S. economy, like a patient in the ER, only responds to adrenaline shots as it tries to stabilize,” Boris Schlossberg of BK Asset Management wrote in a Friday investor’s note. “Therefore, equities will need to see more action from D.C. before they can move meaningfully higher.”
Wall Street also was cheered by news that the New York Stock Exchange will reopen its trading floor after Memorial Day, though brokers will need to wear protective gear and follow social-distancing guidelines.
The NYSE shuttered its floors to live trading in late March after two employees tested positive for Covid-19. No traders will be required to return to the trading floor and may continue to trade remotely, according to commentary posted in The Wall Street Journal.
More than 4.5 million people worldwide have been confirmed infected by Covid-19, according to data from researchers at Johns Hopkins University, and 305,000 have died. In the United States, more than 1.4 million people have contracted the novel coronavirus and nearly 87,000 have died.
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