U.S. stocks opened little changed Friday, August 14, as Wall Street weighed a surprisingly weak consumer-spending report against lower expectations for another Federal Reserve rate increase, while renewed U.S.-Iran tensions kept oil and inflation risks in focus.
The Dow Jones Industrial Average opened up 2.8 points, or 0.01%, at 53,842.80. The S&P 500 gained 7.6 points, or 0.10%, to 7,806.60, while the Nasdaq Composite rose 48.1 points, or 0.18%, to 26,851.15. The muted opening comes one day after the S&P 500 closed at another record high.
The biggest economic surprise arrived before the bell. U.S. retail sales fell 0.6% in July, dramatically weaker than the 0.1% increase economists expected and reversing June’s 0.2% gain. More importantly, the closely watched control-group measure — which strips out autos, gasoline, building materials and restaurants and feeds more directly into GDP calculations — fell 0.4% instead of rising the expected 0.3%.
The weakness does not necessarily mean the consumer suddenly collapsed. June benefited from Amazon moving Prime Day forward from July and competing retailers launching promotions at the same time, while lower gasoline prices reduced July service-station receipts. Still, the report is an important warning that households may be becoming more cautious after months of high gasoline prices and elevated borrowing costs. Consumer spending accounts for more than two-thirds of the U.S. economy.
The softer spending report also gives the Federal Reserve another reason to remain patient. Markets had already reduced the probability of a September rate increase to roughly one-in-three after this week’s cooler CPI and producer-price reports. The 10-year Treasury yield was around 4.65% Friday morning, keeping borrowing costs historically high even as shorter-term rate expectations have eased.
Individual stocks are moving far more dramatically than the indexes. Reddit surged roughly 14% in early trading after S&P Dow Jones Indices said the social-media company will join the S&P 500. JPMorgan estimates index funds tracking the benchmark could ultimately need to purchase about 16.7 million Reddit shares, nearly three times the stock’s average daily trading volume.
Applied Materials fell about 4% to 5% despite reporting strong results and forecasting fourth-quarter revenue of approximately $10.25 billion, well above the $9.54 billion Wall Street consensus. The problem is expectations: Applied Materials shares have more than doubled this year, and investors are demanding evidence that the semiconductor-equipment giant can grow faster than competitors including ASML, Lam Research and KLA.
Other AI-linked names are moving sharply as well. Sandisk gained roughly 3%, Nebius rose about 5%, while Broadcom and Strategy fell between 2% and 3%. The dispersion shows how selective the AI trade has become: investors are still rewarding companies tied to the infrastructure boom, but valuations now leave little room for disappointing guidance or slowing growth.
Oil remains the biggest outside risk. Crude rose earlier Friday after the United States threatened to maintain its naval blockade of Iran indefinitely, adding another layer of uncertainty around the Strait of Hormuz. Brent traded near $88.50 a barrel earlier in the morning and WTI near $82.80, with both benchmarks heading toward weekly gains as shipping through one of the world’s most important energy corridors remains disrupted.
The economic calendar is not finished. The University of Michigan’s preliminary August consumer-sentiment report is scheduled for 10:00 a.m. ET, along with updated inflation expectations, while business-inventory data is also due. At the exact 10:00 a.m. cutoff for this recap, the university had not yet posted the August figures publicly, so JBizNews is not publishing an unverified number. July sentiment stood at 55.2, while one-year inflation expectations were 4.2%.
For the rest of Friday, investors will be watching consumer sentiment, Treasury yields, oil prices and any new U.S.-Iran or Strait of Hormuz developments. After three days of relatively friendly inflation data but Friday’s surprisingly weak retail report, Wall Street is now confronting a different question: whether slower inflation is arriving alongside a meaningful slowdown in consumer demand.
JBizNews Desk | Wall Street
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