US equity markets ended one of their poorest weeks of the year on Friday, tumbling on the back of uninspiring economic data and troubling earnings reports from Wal-Mart Stores Inc and other retailers.
The economic picture that emerged was one of tortoise-like economic growth that might add weight to those who are urging the US Federal Reserve that it is too early to scale back its bond-buying.
However, treasury bond markets appeared to conclude that the Fed would indeed soon taper the program, driven the yield on the 10-year bond up from 2.58 percent on Aug. 9 to 2.83 percent at the end of the week. The 30-year bond also rose significantly.
Analysts cited concerns about higher yields as a factor behind the week’s declines. The Dow Jones Industrial Average suffered two days of triple-digit losses, shedding 344.04 (2.23 percent) to end at 15,081.47. The broad-based S&P 500 dropped 35.59 (2.10 percent) to 1,655.83 and the tech-rich NASDAQ Composite Index ended at 3,602.78, 57.32 (1.57 percent) lower.
The NASDAQ got a lift from news that activist investor Carl Icahn took a large stake in Apple Inc and was pressing the technology icon for a large stock buyback. Apple shares closed the week 10.5 percent higher.
A busy week of economic data had a few bright spots, such as a drop in initial jobless claims, which fell to their lowest in six years.
However, most of the other indicators gave markets little reason to smile. US consumer prices increased a scant 0.2 percent last month, while US producer price data was flat during the same period. Analysts also rued weak consumer confidence and retail sales, which rose by just 0.2 percent.
“What this week did confirm is that we’re in this very modest growth, very modest inflation period,” said Scott Wren, senior equity analyst at Wells Fargo Advisors.
Adding to the unimpressive data was a spate of earnings reports from leading retailers that showed a consistently frugal global consumer.
Wal-Mart, the world’s biggest retailer, led the pack, reporting a 0.3 percent decline in comparable store sales at its US stores due to higher payroll taxes, high gasoline prices and almost non-existent inflation.
The pattern carried to other retailers, such as high-end Nordstrom Inc, which also cut its full-year forecast, and the more mid-market Kohl’s Corp and Macy’s, which missed analyst expectations.
Wren said there is little reason to think consumers will change course quickly.
“You’re not going to get through the aftermath of a gigantic credit bubble in a year or two,” he said.
Wren said he was confident that even in the event of a near-term correction, the stock market was on track to appreciate this year and the next due to rising growth in the US and abroad.