Stocks fell sharply as U.S.-China tensions took the form of military threats. Retail sales also missed estates badly.
All three major U.S. indices fell Friday, with the S&P 500 down as much as 1.1% in early trading. The tech-heavy Nasdaq did lead the way, down 1.3%, although several sectors were down. Investors flocked into safety, sending the 10 year treasury yield down to as low as 0.6% from 0.63%.
The U.S. has sent navy ships and other war-related artillery to the China region, CNN reports. The two sides have had untrusting trade talks of late, with the U.S. threatening more tariffs, all in retaliation for China’s early handling of the coronavirus epidemic. The U.S. is also reportedly considering cutting off Huawei's supply of semiconductors from global chipmakers.
These developments are weighing on market sentiment.
Domestically, U.S. retail sales fell 16.4% for April, versus expectations of a 12.3% drop. Not only is the magnitude of the miss notable, but it comes after a first quarter earnings season that saw many consumer companies say that April was seeing a less severe sales decline than in March, which the market took as a sign that monetary and fiscal stimulus was helping and that the path towards economic growth was underway.
"Soft US data should translate into stronger safety flows and a firmer US dollar,” wrote Ipek Ozkardeskaya, senior analyst at Swissquote Bank in emailed remarks to reporters.
"Taken in aggregate, this paints a pretty bleak picture for earnings expectations, with major retailers like JC Penney, Nordstrom, and Target set to report next week,” said Mike Loewengart, head of investment strategy at E*Trade. Target (TGT) - Get Target Corporation Report, which may be saved somewhat by its strong consumer staples and grocery business, rose 0.7%.