Stock futures fall after retail sales disappoint, earnings come in mixed

By Ti_Kes On Aug 17, 2021

Stock futures pointed to a lower open Tuesday, with the major indexes pulling back from record levels amid a mixed batch of earnings results from major retailers. A closely watched monthly report on retail sales also missed estimates, pointing to a bigger-than-expected deceleration in consumer spending.

Contracts on the S&P 500 edged lower after closing at an all-time high by the end of Monday’s regular trading day. That had marked the index’s fifth consecutive record close. Dow and Nasdaq futures also traded lower.

Shares of Dow component Walmart (WMT) fell in early trading even after the big-box retailer posted second-quarter results that blew past estimates and raised its full-year guidance. Stimulus check spending, strong grocery demand and e-commerce sales helped push U.S. comparable sales excluding gas up by 5.5%, topping estimates but still slowing from last year’s 9.9% surge.

Home Depot (HD), meanwhile, missed on comparable sales for the second quarter, with these rising 4.5%, or more than a full percentage point below consensus estimates. The results appeared to reinforce the slowdown in housing market activity and home renovations after a jump earlier on during the pandemic, and shares of peer home improvement giant Lowe’s (LOW) fell in sympathy.

Even with Tuesday’s early declines, the major stock indexes have been largely grinding higher as a slew of strong corporate earnings results and solid economic data in the U.S. buoyed investor sentiment. The gains on Monday came even as geopolitical concerns loomed, with chaos in Afghanistan continuing from the weekend after the Taliban overtook the country.

The spread of the Delta variant has also posed a risk to equities, as has the specter of a near-term policy shift from the Federal Reserve. On the latter front, market participants are set to receive the Federal Open Market Committee’s July meeting minutes on Wednesday, offering more context around how much more amenable central bank officials have become to the notion of tapering their crisis-era asset purchases as the economic recovery takes place.

„There are a lot of reasons for anxiety among investors in the short term if you look at the Delta variant, of course, if you look at the inflationary outlook, if you look at U.S. policy uncertainty and kind of continued choppy economic data. We think that there is a chance that we’ll see some shorter-term consolidation here over the next month or two,“ Jon Adams, BMO Global Asset Management senior investment strategist, told Yahoo Finance.

„But if you look at a medium-term perspective, we think that we’re pretty constructive on the outlook,“ he added. „Earnings season’s been exceptional, the economy remains strong … We’ll get a lot more clarity in the fall around policy and around the virus. We think that it’s still a time to remain overweight equities and with a bias toward U.S. equities.“

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8:30 a.m. ET: Retail sales sank more than expected in July

U.S. consumer spending pulled back more than anticipated in July as the effects of stimulus checks waned further and concerns over the Delta variant rose.

Retail sales dropped by 1.1% in July compared to June, according to the Commerce Department’s monthly report on Tuesday. This followed a 0.7% monthly rise in June. Consensus economists were looking for a 0.3% dip for July.

Excluding auto and gas sales, retail sales were down 0.7%, which was still a bigger drop than the 0.1% dip expected.

By category, a number of areas that had seen strong sales trends in recent months showed a sharp moderation. Motor vehicle and parts dealer sales were down 3.9% on the month, but still held higher by nearly 16% compared to July 2020. Both building material and supplies dealers, as well as home furnishing stores posted monthly declines in July, consistent with the slowdown in housing market activity as the year progressed.

Non-store retailers, or e-commerce platforms, posted a 3.1% drop in monthly sales. Heading into Tuesday’s report, many economists had expected to see a decrease in this category, given that Amazon Prime Day occurred a month early in June this year.

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7:32 a.m. ET Tuesday: Stock futures fall after mixed retail earnings

Here’s where markets were trading Tuesday morning:

S&P 500 futures (ES=F): -18.25 points (-0.41%) at 4,455.75
Dow futures (YM=F): -144 points (-0.41%) to 35,390.00
Nasdaq futures (NQ=F): -53.25 points (-0.35%) to 15,080.75
Crude (CL=F): -$0.33 (-0.49%) to $66.96 a barrel
Gold (GC=F): +$4.50 (+0.25%) to $1,794.30 per ounce
10-year Treasury (^TNX): -3 bps to yield 1.227%

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6:15 p.m. ET Monday: Stock futures edge lower

Here’s where markets were trading Monday evening:

S&P 500 futures (ES=F): -13.00 points (-0.29%) at 4,449.50
Dow futures (YM=F):-103.00 points (-0.29%) to 35,317.00
Nasdaq futures (NQ=F): -44.00 points (-0.29%) to 15,081.75

NEW YORK, NEW YORK - AUGUST 10: People walk by the Fearless Girl statue outside of the New York Stock Exchange (NYSE) on August 10, 2021 in New York City. Markets were up in morning trading as investors look to a rare bipartisan effort in the Senate to pass a massive infrastructure bill that, if passed, will infuse billions into the American economy. (Photo by Spencer Platt/Getty Images) — NEW YORK, NEW YORK – AUGUST 10: People walk by the Fearless Girl statue outside of the New York Stock Exchange (NYSE) on August 10, 2021 in New York City. Markets were up in morning trading as investors look to a rare bipartisan effort in the Senate to pass a massive infrastructure bill that, if passed, will infuse billions into the American economy. (Photo by Spencer Platt/Getty Images)

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck