STOCKS SLIP TO END THE WEEK: Here’s What You Need To Know

MYLES UDLAND

SEP. 13, 2014

REUTERS/Dylan Martinez

A “No” campaign poster is seen in a field after being vandalised by a “Yes” supporter on the outskirts of Edinburgh, Scotland September 11, 2014.

Stocks fell on Friday after retail sales data came in better than expected, while consumer confidence from the University of Michigan came in at its best level since July 2013. 

First, the scoreboard:

• Dow: 16,980.95, -68, (-0.4%)
• S&P 500: 1,984.98, -12.5, (-0.6%)
• Nasdaq: 4,564.96, -26.9, (-0.6%)

And now, the top stories on Friday:

1. Retail sales in August grew 0.6% according to the latest monthly report from the Census Bureau. This result was in-line with expectations. Following the report, Ian Shepherdson at Pantheon Macroeconomics said, “In one line: Solid, especially when revisions taken into account. August retail sales rose 0.6%, in line with the consensus. Sales ex-autos rose 0.3%, also matching expectations. But note the +0.5% revision to prior data, making the net report stronger than expected and lifting the y/y rate to 5.0% from 4.2% in July.”

2. The preliminary September report on consumer confidence from the University of Michigan showed confidence rose to 84.6 from 82.5 in August. This also beat expectations for a reading of 83.5, and marked the highest reading since July 2013. Following the report, Paul Diggle at Capital Economics said, “Indeed, with the economic recovery continuing to gather pace and wage growth soon to strengthen, this measure of consumer confidence may soon follow the alternative Conference Board index back up to pre-recession levels… The rise in consumer confidence in September adds to the evidence from August’s upbeat retails sales report that third quarter consumption growth will come in stronger than we initially expected. It looks like the economic recovery has a good deal of momentum.”

3. Darden Restaurants was in focus on Friday after activist hedge fund Starboard released a 294-slide presentation outlining ways to transform the company, namely its Olive Garden restaurant franchise. The presentation covered nearly every aspect of the company’s business, from how it executes its unlimited salad and breadsticks promotion, to how the company cooks its pasta, to discrepancies in how Olive Garden’s food appears in promotions and in person. Darden shares fell more than 1.5% on Friday. 

4. Among the biggest gainers on Friday was digital marketing firm Conversant, which gained 30% after announcing a deal to be acquired by Alliance Data Systems for $2.3 billion, or $30 per share. Also higher were shares of Ulta Salon, which gained more than 17% after the company reported earnings that beat expectations. 

5. According to The Wall Street Journal, activist investor Dan Loeb raised $2.5 billion in just two weeks during August, with Loeb planning to use the capital by the end of the year to take activist stakes in companies in the U.S. and abroad. 

6. The U.S. announced new sanction against Russia on Friday in a move aimed squarely at crippling the nation’s $425 billion petroleum industry by limiting oil exploration. BI’s Brett LoGiurato, citing a senior Obama administration official on Friday, reported that the measures are “designed to effectively shut down this type of oil exploration and production activity by depriving these Russian companies of the goods, technology, and services that they need to do this work.” 

7. The British pound retained most of its rally from Thursday evening after the latest YouGov poll showed that voters now favor remaining in the U.K., reversing results from earlier this week. 

Asian Stocks Slip With Ringgit on Plane While Bonds Rise

By Emma O’Brien and Adam Haigh  Jul 18, 2014  

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Photographer: Pierre Crom/Getty Images

Debris from Malaysia Airlines Flight 17 is shown smouldering in a field in eastern... Read More

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• Malaysian Plane Reportedly Shot Down: Who Fired?

Asian stocks fell, with shares in Kuala Lumpur dropping and the ringgit leading declines among emerging-market currencies after a Malaysia Airlines plane was downed in Ukraine. Bonds in the region rose with oil as Israel sending troops into Gaza added to global geopolitical concerns.

The MSCI Asia Pacific Index slipped 0.6 percent by 10:03 a.m. in Tokyo, falling for the first time this week. The FTSE Bursa Malaysia KLCI Index lost 0.5 percent as Malaysian Airline System Bhd shares tumbled 16 percent. Japan’s Topix gauge slid 1.1 percent, while Standard & Poor’s 500 Index futures fell 0.2 percent following the U.S. gauge’s biggest drop in three months. The ringgit weakened 0.4 percent as the Korean won declined. Ten-year bond yields in Australia fell six basis points after touching a one-year low. Oil in New York added 0.5 percent.

Ukraine’s government claimed pro-Russia rebels shot down the passenger jet over disputed territory, killing all 298 people on board. Separatists denied the accusation, blaming the Ukrainian army, as airlines reviewed flight paths over the region. The conflict in the Middle Eastentered a new phase, with Israel sending soldiers and tanks in to the Gaza Strip in an offensive aimed at stopping missile attacks.

“There’s been a huge escalation of geopolitical risk,” Douglas Gordon, a Seattle-based investment strategist at Russell Investment Group, which has about $280 billion in assets under management, told Bloomberg TV. “There’s a lot of uncertainty that the market has to digest. Markets are going to be very cautious and we’re going to see some flight towards quality.”

Missile Strike

The Boeing Co. 777 was en route to Kuala Lumpur from Amsterdam and crashed in the main battleground of Ukraine’s civil war. The incident is stoking tensions just days after the U.S. said rebels were getting weapons from Russia, and after sanctions against the country were tightened. Airlines began shifting planes away from the region, which sits astride some of the busiest air routes between Europe and Asia.

Ukraine’s state security service said it intercepted phone conversations among militants discussing the missile strike, which knocked Flight 17 from the sky near the eastern town of Torez, about 30 kilometers (18 miles) from the Russian border.

Russian President Vladimir Putin said Ukraine’s government bore responsibility for the crash because it wouldn’t have occurred without the current strife. Putin has repeatedly denied Russian involvement in the fighting in Ukraine’s east, which erupted in the wake of former president Viktor Yanukovych’s ouster earlier this year.