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Stocks closed lower on Tuesday, briefly taking the S&P 500 back into negative territory year-to-date.
Oil made new highs for the year, and Brent crude — the international benchmark — came with 50 cents of $50 per barrel.
First, the scoreboard:
Dow:17,529.98, -180.73, (-1.02%)
S&P 500: 2,047.21, -19.45, (-0.94%)
Nasdaq: 4,715.73, -59.73, (-1.25%)
In Fedspeak, Atlanta Fed president Dennis Lockart and San Francisco Fed president John Williams both said they would not rule out a June interest-rate hike.
Lockhart noted that markets may be more pessimistic about the number of times the Fed will hike rates this year than he is. The Fed Fund Futures market is pricing less than a 50% chance of a rate hike through the end of this year.
All of the economic data released Tuesday beat expectations.
The consumer price index (CPI) rose more than expected in April, and recorded its biggest jump since February 2013.
The gauge of inflation rose 0.4% month-on-month and 1.1% year-on-year. Core CPI, which strips volatile food and energy costs, rose 0.2% month-on-month and 2.1% year-on-year, as expected.
Rising gas prices accounted for much of the spike in headline CPI; the gas index rose 8.1%.
"Higher energy prices over the past couple of months are starting to push overall inflation higher, and pass-through from energy to other prices will put upward pressure on core inflation in the months ahead," said PNC chief economist Stuart Hoffman.
Housing starts rose 6.6% to 1.172 million in April, while building permits rose 3.6% to 1.116 million.
What was encouraging about the report was a spike in Midwest activity, which contributed to much of last month's rise in housing starts, according to Quicken Loans Vice President Bill Banfield. The rise in building permits signals that momentum is building in new home construction, he said.
But a downward trend may be starting in the Northeast and West, where starts dropped 3.5% and 2.5% month-on-month respectively, according to Trulia chief economist Ralph McLaughlin.
Industrial production climbed 0.7% last month after a 0.9% decline. Capacity utilization slipped to 75.4% from 75.8%.
Demand for electricity and natural gas rose to a more normal level after unseasonably warm weather in March reduced the need for heating. That raised utility production by 5.8% month-on-month, the most since 2007.
Retail earnings are looking a lot different this week. After heavyweights like Gap and Macy's disappointed last week, we're finally getting some good results.
Particularly from Home Depot, which crushed earnings expectations once again and raised its outlook for the year. The home-improvement retailer benefited from rising home prices and milder weather.
It earned $1.44 per share ($1.33 expected) and revenues of $22.76 billion ($22.32 billion expected.) Sales at stores open for at least one year jumped 7.4% in the US.
And now for some evergreen bullish Home-Depot commentary, here's CFO Carol Tome (our emphasis):
Turning our attention to the full year, while US GDP forecast had pulled back slightly since we built our 2016 sales plan, we continue to see strength in the housing market, with home price appreciation, housing turnover and helpful formation trending where we thought they would. Sales in the first quarter exceeded our expectations, not just because of favorable weather, but because of higher demand for many of our core product categories.
The other bright spot in retail was TJ Maxx, which reported a better-than-expected quarter.
The discount retailer reported earnings per share of $0.76 on revenues of $7.54 billion ($0.71 on $7.28 billion expected.)
TJX can help us understand what's hurting other retailers, as BI's Mallory Schlossberg wrote. According to Neil Saunders, CEO of consulting firm Conlumino, consumers believe that they're getting great value for money. That makes them spend even when they are a bit tight on cash.
Saunders further said TJX offers genuine discounts that have been created with the customer in mind, not as an afterthought to clear clothes nobody's buying.
Of course, Amazon remains a huge threat to every retailer, and Saunders points this out. But he said the thrill of rushing to a store for a bargain before items sell out is something TJX has going for it.
Not the man, but the company he's CEO of which was recently named after him. Its shares have soared 1,000% in a week.
BI's Bob Bryan looked into it, and wrote that the company has made an abrupt pivot from online gaming to cybersecurity.
It sold all but 11% of its stake in daily-fantasy site DraftDay.com last September. And then its delayed annual report filed in April showed it was considering potential mergers, spin-offs and other strategic options.
The following month, Michael Brauser of Grander Holdings bought 1.2 million shares of the company. He's been sued multiple times for fraud involving small, public companies.
And then earlier in May, its chairman stepped down before being replaced by McAfee, who bought the company for $300,000 in cash and 4.76 million shares of MGT.
Clearly, there's a lot going on with this company worth just over $150 million, whose shares changed hands at a volume higher than Bank of America's on Tuesday.