"Not one of the top 10 biggest drags on the
Thursday was a retailer," Aaron Task says on Thursday's
"The Real Story" podcast. "That's not to say the same-store sales data were good, but retail stocks were not the big reason for the market's decline."
Weak same-store sales from retailers such as
Federated Department Stores
earnings-related drop clearly contributed to Thursday's selloff, the biggest for major averages since mid-March. But major averages were hurt more by weakness in energy stocks such as
, financials such as
J.P. Morgan Chase
and healthcare stocks
Johnson & Johnson
, Task notes. "The weak April sales were just an excuse for a selloff that was probably overdue after a nearly uninterrupted five-week rally."
The retail sales, in addition to wider-than-expected March trade deficit data, did revive concerns about the economy's health, raising renewed questions about whether the
erred by not cutting rates or signaling a near-term rate cut on Wednesday.
"I don't think the Fed made a mistake," says Jane Caron, Chief Economic Strategist at Dwight Asset Management, a Vermont-based firm with over $60 billion in assets. "I don't think things are bad enough to warrant easing at this time. The other reason the Fed is right to keep policy unchanged is because one of the most important things for the Fed is to maintain its inflation-fighting credibility. They've drawn a line in the sand and said 1%-2% is the comfort zone for core PCE and it's still running above" that level.
Caron says the Fed may ease this summer if there's "more definitive softness in economic growth," but right now the best strategy is to "keep policy on hold until it's clear any slowdown is temporary."
Task's second guest, Joe Capone, founding member of SMaRT Financial Partners and
contributor, discussed how some hedge funds are taking advantage of the frothy M&A market.
"Every hedge fund manager on the planet knows if there's a plausible merger story for an equity, they can move the stock by buying the right option in size," says Capone. "When you see tremendous options activity ... it's possible some hedge fund managers are long a stock and want to get out -- if you see 10,000 calls trade, that will be on
, and that can move the underlying equity significantly."
Capone's comments came on a day when stocks such as
rescinded some recent merger-related gains.
In the remainder of the podcast, Task reviewed the day's other corporate news, including the
FDA ruling on anemia drugs that hit shares of Amgen and Johnson & Johnson,
renewed weakness and big declines for
bucked the downtrend on news of a change at the top of the airline.
here to listen to the entire podcast.