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Economic news has been mostly positive during the past few sessions, yet stocks have been unable to find strength. On Thursday, data on chain store sales and jobless claims both came in better than expected with Friday’s International Trade release better than forecasts. However, record energy prices continue to put a damper on sentiment and this is keeping the bulls at bay.

Same-store sales data from the nation’s retailers in April were mostly better than expected with Wal-Mart (WMT) leading the way. WMT announced that same store sales rose 3.2 percent in April, easily surpassing estimates. The ICSC-UBS reported that about two-thirds of chain stores beat expectations, yet retail stocks have suffered the past two sessions. The fact is that record high energy prices have taken a toll on spending, as has tight credit conditions. The S&P Retail Index ($RLX) closed Friday’s session at 395.05, well below its 52-week high of 839.67.

Speaking of energy prices, crude rose $2.27 a barrel Friday to close at another record high of $125.96. This week alone, oil prices rose more than 8 percent on continued worries about global supplies. The fact that the dollar continues to decline is another major factor in commodity prices as well. When the dollar falls, foreign traders will buy dollar denominated assets. Gas prices are at record prices as well with a gallon of unleaded averaging $3.671 and diesel averaging $4.269 a gallon. This obviously has an impact on sentiment and spending, which is something the Fed has to balance again inflation pressures.

Jobless claims for the week ending May 3 fell by 18,000 to a reading of 365,000. This was a little below expectations, though the moving average did remain elevated at 367,000 claims. This data continues to point to a soft labor market with nonfarm payrolls down the past four months, but better than expected in April. Continuing claims for the prior week fell slightly, but the four-week moving average was up by 17,000 to a new four year high of 2.999 million.

The trade gap narrowed in March to a deficit of $58.2 billion from $61.7 billion in February. Expectations were for the deficit to come in at $60.8 billion. Both exports and imports fell during the month, but exports were down just 1.7 percent compared with a 2.9 percent decline in imports. The oil trade gap shrank to $35.2 billion from $37.4 billion, but this could reverse in April and May. Though this data should improve GDP estimates for the quarter, it also shows that businesses are slowing their purchases due to concerns about a weak economy. In the past year, exports are up 15.5 percent with imports up 7.1 percent.

Next week’s economic calendar shows several key reports, all of which could impact stock prices. Retail sales will get things started Tuesday, followed by the CPI on Wednesday, industrial production on Thursday and housing starts on Friday. Oil prices will also remain a focus and traders will be listening to Fed speeches for an idea of where they see the economy heading and how they plan to use monetary policy going forward.

Jody Osborne

Senior Staff Writer & Options Strategist

Optionetics.com ~ Your Options Education Site

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