The stock market continued to book losses Friday after a key inflation measure rose. Nike skidded 12% after it shocked investors by announcing excess inventory on its books.
The S&P 500 was down 1% in late afternoon trading while the Dow Jones Industrial Average fell 1.2%. The Nasdaq composite posted a loss of 0.4%. Small caps outperformed as the Russell 2000 rallied nearly 0.7%.
Volume fell on the Nasdaq and the NYSE vs. the same time on Thursday.
The yield on the benchmark 10-year Treasury was off Wednesday's high of 3.97%, settling down to 3.74%.
For the month of September, the S&P 500 is set to close down roughly 8%, while the Dow Jones is on track for a 7% monthly loss. The Nasdaq is faring the best among major benchmarks, with a loss of 3%.
Stock Market Dragged Down By Rising Inflation
The Federal Reserve's preferred inflation measure, the personal consumption expenditure price index, rose 0.3% in August, marking a 6.2% year-over-year increase. Both numbers were hotter than expected.
The index tracks the change in prices of goods and services purchased by consumers throughout the economy.
"While the headline number raises eyebrows, the devil's in the details," said Peter Essele, Head of Portfolio Management for Commonwealth Financial Network." Durable goods prices are clearly moving into retrenchment territory. The backup in inventories is going to weigh on earnings at big box stores like Walmart, Target, and Home Depot."
Walmart slid 1% Friday, Target fell 1.6% and Home Depot was up 0.3% in late trading.
Consumer sentiment came in lower than economist expectations, at 58.6 vs. the consensus estimate of 59.5, as Americans remain pessimistic about the economic outlook.
Crude oil lost 1.6% to $79.97 per barrel.
Bitcoin popped 1.8% to $19,720. Bitcoin is on pace for its worst nine months to a calendar year on record (Based on available data back to 2011), according to Dow Jones Market Data.
Q3 Earnings Estimates Seen Weakest In Two Years
Meanwhile, Wall Street analyst estimates for Q3 2022 show the largest EPS drop in more than two years, according to FactSet. Estimated earnings growth for the S&P 500 is just 2.9%, marking what would be the lowest annual growth rate since Q3 2020 (-5.7%).
Nike reported a 44% jump in global inventory after Thursday's close, up 65% in North America. It also warned about further macroeconomic headwinds, even though Nike reaffirmed its fiscal-year sales outlook.
Q1 2023 revenue rose 4% to $12.69 billion, beating estimates. Earnings also beat slightly, at 93 cents per share, representing a 20% year-over-year decrease.
The sports apparel giant also reported declining sales in Greater China, its third-biggest market by revenue. The widely-held stock is down over 43% for the year as it wraps up the last trading day of the third quarter.
Nike shares recently found resistance at their 50-day moving average and are currently trading below this zone.
Chips Fall But Micron Gains
Semiconductor equipment stocks struggled Friday after memory-chip maker Micron Technology slashed planned spending on new chip gear amid a market downturn. MU stock rose as investors speculated that shares had bottomed after a dismal fiscal fourth-quarter earnings report.
Micron late Thursday said it is cutting its spending on wafer fabrication equipment by nearly 50% in the current fiscal year. It delivered the news after shocking Wall Street with its weak outlook for its fiscal first quarter.
Applied Materials dropped 1.4%, ASML 1.9% and KLA 1.6%. Lam Research was flat, trading near 371.
Animal health specialist Charles River Labs led the S&P 500, up 4.5% and rising above the 21-day exponential moving average on the MarketSmith chart. Shares surged after Jefferies upgraded the stock to buy from hold with a 240 price target. It's is on pace for its largest one day increase since May 2020.
The Innovator IBD 50 ETF traded flat, powered on the upside by fiber optics stock Clearfield and dragged down by Cal-Maine Foods and Marten Transport.
Follow Michael Molinski on Twitter @IMmolinski
