Here are five things you must know for Friday, May 18:
1. -- Stocks Rise but China Talks Remain in Limbo
U.S. stock futures were gaining on Friday, May 18, poised to finish the week in the green, though trade talks with China continued to dampen investor sentiment.
Contracts tied to the Dow Jones Industrial Average
China's Foreign Ministry said Friday that it has not offered to slash its trade surplus with the U.S. by $200 billion, refuting earlier reports suggesting as much. A number of media outlets had reported earlier in the week that China agreed to meet President Donald Trump's demand that the country cut its trade surplus and increase its purchases of America goods.
"This rumor is not true. This I can confirm to you," said China Foreign Ministry spokesman Lu Kang to reporters Friday. "As I understand, the relevant consultations are ongoing and they are constructive."
China's trade deficit with the U.S. in 2017 was $375 billion, while U.S. imports from China were $506 billion and exports to China were $130 billion, according to the U.S. Census Bureau. President Trump has long criticized the significant trade deficit between China and the U.S. His administration's decision to impose import tariffs on Chinese goods in March catalyzed what has evolved into a tit-for-tat trade dispute. Investors have become concerned that failure on behalf of both China and the U.S. to reach a trade agreement could result in an all-out global trade war.
The President said he doubts trade talks will be successful.
"Will that be successful? I tend to doubt it," the president told reporters during an appearance with NATO Secretary-General Jens Stoltenberg. "The reason I doubt it is because China has become very spoiled. The European Union has become very spoiled. Other countries have become very spoiled, because they always got 100% of whatever they wanted from the United States...But we can't allow that to happen anymore."
The U.S. economic calendar on Friday includes a speech from Federal Reserve Governor Lael Brainard about the modernization of the Community Reinvestment Act in New York at 9:15 a.m. ET.
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2. -- Benchmark 10-Year Yield Continues to Climb
The benchmark 10-year Treasury note yielded 3.104% on Friday morning as bond yields remained intensely in focus on Wall Street.
The 10-year yield was slightly down from highs, but it remains above the psychologically important 3% threshold and at a seven-year peak of 3.1%. In late-Thursday trading, the 10-year note yielded as much as 3.109%, its highest level since July 2011. If the yield continues to rise, some investors may start to sense that equities will become less attractive.
While the 10-year is the benchmark for global fixed income, other Treasury notes were also soaring this week. The 30-year Treasury note yielded as much as 3.245% Thursday evening, its highest level since July 2015.
The yield, which moves inversely with government bond prices, jumped this week as strong retail sales contributed to the larger picture of a strong and momentous U.S. economy. Retail sales climbed 0.3% in April and were revised up to 0.8% growth in March, suggesting the economy still has momentum to continue growing at a steady pace.
In turn, that sparked concern on Wall Street about possible inflation and more aggressive Fed tightening. Neither are friends to stock markets.
At the same time, bond markets have suffered as trade talks between the U.S. and China continue to face mounting challenges. Any further trade troubles could lead to higher prices and, subsequently, higher inflation.
3. -- Retail Earnings a Mixed Bag
With the bulk of big retail earnings hot off the presses, the industry remains unsteady.
Nordstrom Inc. (JWN) reported first-quarter financials late Thursday that showed the Seattle-based retailer missed on same-store sales, coming in with a slight increase of .6% versus the 1% estimate. Nordstrom's stock slid 7.62% premarket Friday.
The retailer's net income for the quarter came in at $87 million, or 51 cents per share, from $63 million, or 37 cents per share, last year. Nordstrom's total revenue increased to $3.56 billion from $3.35 billion, beating analysts' average estimate of $3.46 billion. Nordstrom is a holding in Jim Cramer's Action Alerts PLUS.
The results mark a mixed reporting season for department stores.
Macy's Inc. (M) reported quarterly earnings on Wednesday, snagging same-store sales growth of 4.2% for the quarter and topping estimates. Macy's reported adjusted earnings per share of 42 cents for the first quarter, easily topping FactSet analysts' expectation of 36 cents. Macy's also served up $5.5 billion in revenue, which beat forecasts of $5.4 billion for the quarter. The retailer also raised guidance for the year.
J.C. Penney Co. (JCP) offered a bleak outlook in earnings released Thursday. The retail giant posted earnings of $2.58 billion, but analysts had expected it to announce earnings of $2.61 billion for the first quarter. The net loss totaled $78 million or 22 cents per share. Comparable-store sales are estimated to be between 0% and 2% in fiscal 2018.
4. -- PayPal Buys iZettle in $2.2 Billion Deal
Action Alerts PLUS holding PayPal Holdings Inc. (PYPL) is buying international commerce platform iZettle for $2.2 billion to get a bigger presence in small businesses. Stockholm-based iZettle, which had been pursuing an IPO, provides payment services to small and mid-sized operations in Europe and Latin America.
"We are not surprised to see [PayPal] put its impressive balance sheet to work for strategic M&A," Jefferies LLC analyst Ramsey El-Assal wrote in a Thursday report. The payout comes to 11 times projected 2019 net revenue, PayPal said, and will dilute 2018 earnings by one cent per share.
The deal advances PayPal's goal of expanding within stores. "iZettle's signature mobile card reader and suite of tablet-based point-of-sale solutions represent another step in [PayPal]'s long journey to enable acceptance at the physical retail countertop," El-Assal noted.
PayPal stock climbed 1.02% premarket Friday.
5. -- Cambridge Analytica Files for Bankruptcy in U.S.
Cambridge Analytica LLC, the company behind the recent Facebook Inc. (FB) data breach scandal, has filed for Chapter 7 bankruptcy in a New York court late Thursday. The company listed assets in the range of $100.001 to $500,000 and liabilities between $1 million and $10 million.
The data analytics firm, which may have used Facebook user information to attempt to influence the outcome of the 2016 presidential election, previously said it planned to shutter its business after a sharp decline in demand for its services. The company said it lost "virtually all" of its customers and suppliers since accusations that around 87 million Facebook users had their data accessed and passed on to Cambridge Analytica.
"As a result, it has been determined that it is no longer viable to continue operating the business, which left Cambridge Analytica with no realistic alternative to placing the company into administration," the London-based company said. The political consultancy firm applied to start insolvency proceedings in the U.K. on Wednesday, May 2.
Facebook is a holding in Action Alerts PLUS.
6. -- FRIDAY BONUS
TheStreet presents on May 22: "How to Stomach Market Volatility." Hosted by Fisher Investments, the exclusive live webinar will give you the tools to successfully navigate market volatility and discuss why having a wealth manager is more critical than ever before. Quickly register for the event here.