U.S. Stocks Fall as Economic Data Disappoints

By Riva Gold and Corrie Driebusch Features Dow Jones Newswires

U.S. stocks, Treasury yields and the dollar edged lower Friday, as the latest batch of U.S. economic data fell short of expectations.

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The lackluster readings follow a string of soft first-quarter data. Investors have largely brushed off signs of weak economic growth in 2017 on the rationale that the first few months of the year tend to be slow and corporate earnings have been stronger than expected. U.S. stocks are hovering close to record highs, while volatility has fallen to historical lows.

The Dow Jones Industrial Average fell 30 points, or 0.1%, to 20889 shortly after the opening bell. The S&P 500 dropped 0.1%, and the Nasdaq Composite edged up 0.1%.

The WSJ Dollar Index slipped 0.2% and the yield on the 10-year U.S. Treasury edged down slightly to 2.355% from 2.400% Thursday. Yields fall as prices rise.

Retail sales improved slightly less than anticipated in April, according to the Commerce Department, and a closely watched measure of underlying U.S. inflation came in soft, the Labor Department said Friday. When excluding food and energy prices, the consumer-price index, which measures what Americans pay for everything from vegetables to new vehicles, rose 1.9% in April from the prior year, the first time it's been below 2% since October 2015.

The data follows disappointing retail earnings. Shares of Nordstrom dropped 5.8% after it reported an unexpected fall in same-store sales, while J.C. Penney shares fell 6.6% after the department store operator reported a first-quarter loss. Downbeat results from Macy's on Thursday had sent its shares down roughly 17%, spurring concerns about the sector.

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"Looking at traditional brick and mortar sales, it's pretty clear [retailers] are losing to online juggernauts," said Jimmy Chang, chief investment strategist at Rockefeller & Co.

Despite recent weakness in retailers, the overall earnings picture in the U.S. has been supportive of markets this quarter, with companies on track for the fastest growth in earnings per share since 2011, according to CFRA Research.

"The first-quarter earnings seasons is one of the best overall we've seen in the past decade," said Olivier Marciot, investment manager at Unigestion.

"Consumption has been kind of weak in the last couple of months...but we are not worried at all for the moment about the U.S. consumer," Mr. Marciot said.

The S&P 500 is on track to end the week 0.3% lower, snapping a three-week winning streak. All three major indexes are within 1% of record highs.

Elsewhere, the Stoxx Europe 600 edged down less than 0.1% as data showed Germany's economy outpaced the U.S. at the start of the year.

Investors have poured money into the region's equities in recent weeks, with a record inflow of $6.1 billion into European equities since centrist Emmanuel Macron won the French election, according to Bank of America Merrill Lynch. European stocks are close to two-year highs as political jitters have given way to increasing signs of an improving economy and corporate earnings.

Earlier, stock markets were broadly lower in Asian trading hours, tracking weakness in Europe and the U.S. on Thursday. Japan's Nikkei Stock Average fell 0.4% Friday as the yen strengthened modestly against the dollar, but gained 2.3% for the week. South Korea's Kospi was off 0.5% after reaching a record high, while Australia's S&P/ASX 200 declined 0.7%.

Hong Kong's Hang Seng Index inched higher for a fifth consecutive trading day while the Shanghai Composite rose 0.7%, led by gains in insurance, aviation and automotive shares.

Lucy Craymer, Patrick Sullivan, Jacob M. Schlesinger and Nina Adam contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

(END) Dow Jones Newswires

May 12, 2017 09:53 ET (13:53 GMT)