U.S. Stocks

U.S. Stocks Set To Open Lower After Disappointing Retail Sales Report

Retail Sales Dive By 16.4% In April

S&P 500 futures are pointing to a lower open following the release of a disappointing Retail Sales report.

Analysts expected that Retail Sales will decline by 12% month-over-month in April, but the report showed that Retail Sales declined by as much as 16.4%.

The year-over-year data is even more grim as Retail Sales shrank by 21.6%. Retail Sales excluding Autos also showed a notable decrease, declining by 17.2% compared to analyst consensus which projected a decline of 8.6%.

Put simply, the U.S. retail sector has taken a huge hit in April as consumers were locked in their homes due to coronavirus containment measures.

Previously, worse-than-expected economic data often fueled market rallies as investors bet on additional stimulus from the government and the Fed.

However, this week’s focus has shifted to potential risks of the second coronavirus wave and a deeper-than-expected recession so the poor Retail Sales data may lead to a material sell-off.

U.S. – China Tensions Increase

U.S. – China tensions are set to increase further as the U.S. wants to block shipments of semiconductors to Huawei from global chipmakers, according to a Reuters report.

The move will certainly lead to a deterioration of an already challenging relationship as the U.S. accuses China of concealing the true state of things on the coronavirus front early in the pandemic.

In a recent interview, the U.S. President Donald Trump even suggested that he could cut ties with China if necessary.

The market will watch the development of this story very closely as a trade war between the two biggest economies will further complicate the rebound from the coronavirus crisis.

Oil Continues To Rally As Traders Believe That The Worse Is Over

Oil continues its upside move as market participants believe that the previously announced cuts will be sufficient enough to improve the supply/demand balance and provide support for oil prices.

Recently, International Energy Agency has improved its oil demand outlook, and the oil market is focused on the current reopening efforts around the globe.

In addition, the U.S. domestic oil production continues to fall at a rather rapid pace, eliminating fears about a potential oil storage crisis.

It remains to be seen whether oil-related equities will be able to provide support for the general market today but oil price upside may serve as a catalyst which could prevent the market from a bigger sell-off.