The Dow Jones traded flat on Friday after mixed retail sales data cast a shadow on the stock market rally.
The Dow Jones Industrial Average (DJIA) flatlined on Friday, rising just a handful of points as investors digested a mixed bag of economic data.
Economists at ING fear the government needs to do more to keep the economy afloat. Congress must overcome gridlock to pass another stimulus bill, but even that might not be enough. The Federal Reserve may need to ramp up its involvement in financial markets too.
Stocks were choppy across the board as the S&P 500 tried – and failed – to join the Nasdaq in record territory. Here’s where Wall Street’s major indices stood roughly an hour before the close:
Economic data tilted towards the negative in the United States. Michigan consumer sentiment beat forecasts, while retail sales data came in mixed.
Video: Retail Sales Miss in July, Core Sales Beat
It’s challenging to evaluate whether the latest readings are indicative of a sustainable rise in spending. It seems just as likely the flurry of consumer activity was the inevitable product of stimulus flooding into the economy.
And with the stimulus spigot running dry, that recovery could quickly fade.
ING economist James Knightley is in the pessimistic camp. He believes more stimulus is necessary to keep the economy headed in the right direction. And he predicts the Federal Reserve may need to throw its weight around to keep borrowing costs down.
Calls for further fiscal and monetary policy support are likely to grow. Last week’s Presidential Executive Orders will provide some help, but more assistance for business and consumers will likely be required to ensure the positive economic momentum continues. Upward moves in Treasuries also needs to be watched carefully in case it translates into higher borrowing costs, and we wouldn’t be surprised to see the Federal Reserve stepping up its asset purchases in coming months.
After a meteoric climb, the Federal Reserve’s balance sheet had been in decline for a while. It recently started ticking back up again.
Clearly, the central bank has its eyes on signs the recovery may be sputtering, but Jerome Powell has been clear that monetary policy has its limits. He says more fiscal support is really what U.S. citizens need.
Wall Street will remain glued to optimism that more help is coming from Congress, but the odds of another aid package grow slimmer by the day.
The Senate adjourned through Labor Day today, which means a deal is weeks away at best – and may never come at all.
It was a relatively quiet day in the Dow 30, but there were a few moves worth noting.
Leading the way was Boeing, which rallied 2%. Walgreens and Dow Inc. were the only other DJIA components to rise more than 1%.
The index’s worst performer was Apple – its heaviest component – which fell 0.6%. After coming within a few billion dollars of achieving a $2 trillion market cap, AAPL balked before hitting the finish line. At least for this week.