Stocks were pointing toward a down day as trade tensions continue to simmer and economic data out of China and the U.S. disappointed. However, news that President Trump will ease back on one trade fight while keeping pressure on China prompted a reversal in the market that has held through noon. The catalyst for the move higher has been reports that the administration plans to delay a decision to impose tariffs on auto imports while it continues negotiations with Europe and Japan.
ECONOMIC EVENTS: In the U.S., retail sales fell 0.2% overall in April, with a scant 0.1% gain in the ex-auto component, both of which were weaker than forecast. Industrial production fell 0.5% in April, with capacity dipping to 77.9%. Business inventories were flat in March, with sales climbing 1.6%, as expected. The NAHB housing market index rose 3 points to 66 in May, which was better than expected. The Empire State manufacturing index was also better than expected, increasing 7.7 points to 17.8 in May.
In China, fixed asset growth slowed to 6.1% year-over-year in the year to April from 6.3% growth in the previous release. Industrial production growth slowed to 5.4% year-over-year from 8.5% previously. Retail sales growth decelerated to 7.2% year-over-year from 8.7%.
TOP NEWS: President Trump is expected to delay a decision to impose tariffs on auto imports by up to six months in an attempt to avoid blowing up negotiations with Europe and Japan, both CNBC and Bloomberg have reported, citing people close to the discussions. Trump faces a May 18 deadline over how to proceed with his threat to impose a tariff of as much as 25% on imported cars and parts in the name of U.S. national security, the reports noted. Morgan Stanley analyst Michael Zezas called the reported delay plans a "modest positive" for the automaking group, stating that extra time somewhat reduces the probability of tariffs going into place but that the core impasse between the U.S. and EU - namely whether or not to include agricultural issues in negotiations - still remains and is the real driver of the tariff tension. Publicly traded automakers that moved up following the headlines regarding the delay decision include Fiat Chrysler (FCAU), Ford (F), General Motors (GM), Honda (HMC), Toyota (TM) and Volkswagen (VWAGY).
Macy's (M) reported better than expected earnings for the first quarter, with CEO Jeff Gennette telling investors that the company is "off to a solid start this year." The company also backed its fiscal year profit outlook, but acknowledged on the associated earnings call that a fourth tranche of China tariffs that has been threatened by President Trump, if enacted, would impact Macy's private and national brands and wasn't contemplated in guidance.
Similar to Macy's, Alibaba (BABA) reported better than expected quarterly earnings and initially saw its shares head sharply higher. Also like Macy's, though, some earnings call comments took some energy out of the stock's momentum. In the case of Alibaba, the comments pointed to for short-circuiting the rally were the CEO stating that the company doesn't plan to expand its recommendation feed monetization at this time.
MAJOR MOVERS: Among the noteworthy gainers was Beyond Meat (BYND), which rose 10% after the Financial Post reported that Restaurant Brands' (QSR) Tim Hortons will be testing three breakfast options made with Beyond Meat's meatless patty. Also higher were Catalyst Pharmaceuticals (CPRX), which gained 13% after reporting quarterly results.
Among the notable losers was ImmunoGen (IMGN), which declined 33% after the FDA recommended a new Phase 3 trial to evaluate the safety and efficacy of mirvetuximab soravtansine. Also lower were Roan Resources (ROAN), Agilent (A) and and Tilray (TLRY), which fell 14%, 12% and 4%, respectively, after reporting quarterly results.
INDEXES: The Dow rose 137.06, or 0.54%, to 25,669.11 , the Nasdaq gained 82.37, or 1.06%, to 7,816.86 , and the S&P 500 added 18.86, or 0.67%, to 2,853.27 .
