Retail gets a win. The sector rallied on higher hopes for the second quarter, giving the rest of Wall Street a boost and pushing the Dow Jones Industrial Average to log a record close for the second day in a row.
The Dow added 0.10%, enough to clinch a new record of 21,553. The S&P 500 added 0.19%, and the Nasdaq rose 0.21%.
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Upbeat guidance from Target Corp. (TGT - Get Report) inspired a rally in the retail sector. Target anticipates a "modest increase" in same-store sales over the quarter, far better than analyst consensus of a 1.2% decline. Adjusted earnings are expected to come in "above the high end" of its previous target range of 95 cents to $1.15 a share. CEO Brian Cornell said the company had seen "additional, broad-based improvement in traffic and category sales trends in the second quarter, despite continued challenges in the competitive environment."
Target rose more than 4%. Other retailers took Target's lead. Macy's Inc. (M - Get Report) , Kohl's Corp. (KSS - Get Report) , Nordstrom Inc. (JWN - Get Report) and Gap Inc. (GPS - Get Report) were higher, while the S&P Retail SPDR ETF (XRT - Get Report) increased 2.3%. Walmart Stores Inc. (WMT - Get Report) , up 1.5%, led the Dow. J.C. Penney Co. Inc. (JCP - Get Report) increased 7%, caught up in the retail rally and also climbing on its announcement of new toy stores. The retailer will open toy shops in all of its brick-and-mortar locations in order to continue to explore new merchandise categories and differentiate its business. The toy shops will be strategically placed near the retailer's Disney Collection (DIS - Get Report) and feature an extensive selection of toys for kids of all ages including dolls, action figures, race cars, arts and crafts sets, and board games.
Healthcare names were under pressure on Thursday after the Senate GOP released a revised repeal-and-replace bill draft. The new draft includes an amendment from Sen. Ted Cruz which allows insurers to offer cheap, bare-bones insurance plans so long as they also offer Obamacare plans.
Senate Majority Leader Mitch McConnell has struggled to whip up votes for the initial iteration of the controversial healthcare bill since it was released to the public in late June. The Congressional Budget Office calculated that the previously released bill would leave 22 million more people uninsured by 2026.
Major industry names such as Johnson & Johnson (JNJ - Get Report) , Novartis AG (NVS - Get Report) , Pfizer Inc. (PFE - Get Report) , Merck & Co. (MRK - Get Report) and Sanofi SA (SNY - Get Report) were lower.
Federal Reserve Chair Janet Yellen headed to Capitol Hill again on Thursday, this time appearing before the Senate Banking Committee. The two-day affair is part of her semiannual appearance before lawmakers known as the Humphrey-Hawkins testimony.
Yellen again took a measured approach to her outlook on recent soft inflation trends in comments to the Senate. Yellen said she regards "the risk with respect to inflation as two-sided," arguing that it has been weak but that a tightening labor market should bring upward pressure to wages and prices. Inflation's struggle to get to the Fed's 2% target rate has raised questions over whether the Fed is tightening too soon.
Yellen engaged in a lengthy Q&A before the House Financial Services Committee on Wednesday, July 12, covering everything from whether inflation targets need to be revised to the Fed's plans to tighten monetary policy. A measured appearance by Yellen soothed fears of a central bank moving too fast, while bolstering confidence in the U.S. economic recovery.
In her House testimony, Yellen reiterated that rate increases would be gradual. Like Fed Gov. Lael Brainard, Yellen doesn't expect rates will have to rise by too much to reach neutral. Also in her testimony, Yellen said that the central bank will likely begin unwinding its $4.5 trillion balance sheet this year, while closely monitoring low-inflation trends.
No monthly meeting this year has chances greater than 50% of seeing another rate hike from the Fed. The closest, the December meeting, has a 0.25% interest rate increase at a 47.3% likelihood, according to CME Group fed funds futures.
Market relief over Yellen's Wednesday testimony sent markets rallying. The Dow Jones Industrial Average closed out at a new record of 21,533 on Wednesday, superseding the last record notched on June 19.
President Donald Trump's budget would slash the deficit by one-third over the next 10 years, the Congressional Budget Office calculated on Thursday. However, the budget does not balance as the Trump administration had said. The CBO estimated larger deficits than the Trump White House as revenue projections were lower.
Initial jobless claims fell in the past week, another sign of a tightening job market. The number of new claims for unemployment benefits in the U.S. fell by 3,000 to 247,000. Analysts expected a slightly sharper decrease to 246,000. The less-volatile, four-week average increased by 2,250 to 245,750.
Producer prices crept higher in June, while the longer-run 12-month core cooled. U.S. producer prices rose by 0.1% last month, while core prices excluding food and energy increased by 0.2%. Producer prices over the past 12 months grew 2%, down from 2.4% in May. Core 12-month core prices also increased 2%, 10 basis points lower than the month earlier.
Oil prices pared losses to climb Thursday even after a report from the International Energy Agency said compliance from OPEC members on its agreement to cut production fell to the lowest level of the year in June. In its regular monthly report, the group said cartel members' compliance with the pact to trim production by 1.2 million barrels per day -- which was extended through the end of March 2018 -- slipped to 78% in June from 95% in May. Global oil supply, the IEA said, rose to 720,000 barrels per day last month as major producers such as Saudi Arabia, Libya and Nigeria lifted output.
"Each month something seems to come along to raise doubts about the pace of the rebalancing process," the IEA said. "This month, there are two hitches: a dramatic recovery in oil production from Libya and Nigeria and a lower rate of compliance by OPEC with its own output agreement."
West Texas Intermediate crude added 1.3% to $46.08 a barrel Thursday.
Delta Air Lines Inc. (DAL - Get Report) declined nearly 2% after falling short of profit estimates in its second quarter. Adjusted earnings of $1.64 a share missed estimates by 2 cents. Revenue increased 3% to $10.79 billion, but fell short of $10.82 billion consensus. By region, domestic revenue and Latin America revenue rose by 4.4% and 14.1%, respectively, while Atlantic and Pacific sales declined by 0.6% and 12.9%.
Overall, analysts anticipate another quarter of above-average strength. CFRA Research said it anticipates 6.2% year-over-year earnings growth among S&P 500 companies, better than a 1.7% earnings decline seen in the same quarter a year earlier. The energy sector is expected to lead the pack, recovering from weakness over the previous two years.
Snap Inc. (SNAP - Get Report) rose 3% after Stifel upgraded its rating to buy. Analyst Scott Devitt is optimistic over the company's user engagement and overall growth and says that recent selloffs could be an overreaction to a lock-up expiration. The disappearing app company has been under pressure recently, most notably at the beginning of the week when the stock closed below its March initial public offering price of $17.
Eat, Drink and Talk Money with Jim Cramer
Meet Jim Cramer at an exclusive reception at his Bar San Miguel in Brooklyn, N.Y., on Tuesday, July 25, from 6:30 p.m. To 9 p.m.
The evening will start with a screening of Jim's CNBC show Mad Money. Afterwards, Jim will join the party fresh off of the CNBC set to mingle, take photos and answer your investing questions.
Tickets include dinner, drinks and an autographed copy of Jim's book Get Rich Carefully.
Click here for more information or to buy tickets.
Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.
When: Tuesday, July 25, 6:30 p.m. to 9 p.m.
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