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Dow Rises as Strong Retail Sales Suggest Consumer Remains Healthy

Published 16/10/2020, 18:19
Updated 16/10/2020, 18:27
© Reuters.

© Reuters.

By Yasin Ebrahim

Investing.com – The Dow rallied Friday, as stronger retail sales data suggesting the U.S. consumer, the backbone of the economy, remains in good shape helped ease investor worries about a slowdown in the recovery.

The Dow Jones Industrial Average rose 0.82%, or 234 points. The S&P 500 was  up 0.53%, while the Nasdaq Composite gained 0.39%.

The Commerce Department said Friday that retail sales rose 01.5% last month. That confounded economists’ forecast for a 0.5% rise. The retail sales control group – which has a larger impact on U.S. GDP –  rose 1.4%, topping expectations for a 0.2% increase. 

Some economists, however, warned the data could represent the "last hurrah" for the consumer heading toward the end of the year as income will likely decline amid a lack of stimulus.  

"September strength may have been the last hurrah for the consumer this year. With the back to school/work spending likely behind us, and disposable income set to contract sharply in Q3/Q4 without fresh fiscal stimulus, we’ll be lucky if consumption is flat in Q4," Jefferies (NYSE:JEF) said in a note.

Despite little progress on stimulus talks, many believe that it is a matter of when rather than if further federal aid is coming, with House Speaker Nancy Pelosi suggesting earlier this week that a fiscal package will be rolled out before January.

Utilities, industrials, and health care led the broader market higher, with the latter getting a boost from a rise in shares of Regeneron Pharmaceuticals (NASDAQ:REGN) and Pfizer .

Pfizer (NYSE:PFE) said it would apply for emergency U.S. approval of its Covid-19 vaccine it is developing with Germany's BioNTech in the third week of November. Pfizer was up more than 2%, while Biontech Se (NASDAQ:BNTX) was up 3%.

The news helped restore some optimism over a Covid-19 vaccine after both Eli Lilly and Company (NYSE:LLY) and Johnson & Johnson (NYSE:JNJ) announced setbacks earlier this week.

Tech, however, lagged the broader move higher even as the Fab 5 stocks traded mostly higher.

Amazon.com (NASDAQ:AMZN), Facebook (NASDAQ:FB), Google-parent Alphabet (NASDAQ:GOOGL) and Microsoft  (NASDAQ:MSFT) traded higher, while Apple (NASDAQ:AAPL) fell 0.5%.

On the earnings front, investors digested mixed corporate reports.

Bank of New York Mellon (NYSE:BK) reported better-than-expected quarterly results on the top and bottom lines, sending its shares up 3%.

Schlumberger NV (NYSE:SLB) fell more than 7% after reported mixed results after its quarterly earnings beat, but revenue fell short of estimates, pressured by coronavirus-led disruptions in its drilling business.

In other news, Boeing (NYSE:BA) climbed 4% after Europe’s aviation regulator said the company’s maligned 737 Max jet was airworthy again.

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