Stocks slip in cautious trading after weak US retail sales data

On Friday, August 14, stock markets experienced a decline during light summer trading in New York. The uncertain situation in the Middle East, particularly the conflict between the United States and Iran, along with concerns about the US economy, contributed to cautious investor behavior. Oil prices increased, prompting traders to prepare for additional market volatility.

The S&P 500, which had reached a new record high on Thursday, saw stocks turn negative on Wall Street. European indices also showed lower results after a mixed performance in Asia.

Weaker than anticipated US retail sales data on Friday raised questions about the prospects of the world's largest economy. Total US retail sales dropped by 0.6% in July compared to the previous month, amounting to $763.6 billion. A new survey by the University of Michigan revealed that consumer confidence fell by around 8% in August, ending a two-month upward trend.

The decline in consumer sentiment was particularly pronounced among older consumers, lower-income households, and those without college degrees, who are most vulnerable to potential eroding purchasing power due to inflation.

Investment analyst Bret Kenwell from eToro cautioned that investors should be cautious about their expectations for the Federal Reserve to raise interest rates anytime soon. He emphasized that consumers need to show the same resilience as the economy to stay strong. While US petrol prices decreased in July, the relief did not lead to increased spending elsewhere.

The ongoing US-Iran conflict remained a significant concern for investors, along with worries about persistent inflation. Cresset Capital's Jack Ablin noted that traders would closely monitor oil prices, developments in the Middle East, and Treasury behavior after a weak auction earlier in the week. Light trading volumes were expected on a Friday during the vacation season.

In the technology sector, despite record quarterly sales of $9.1 billion, shares of Applied Materials, a US chip manufacturing equipment group, fell by more than 5%. Investors had anticipated higher returns, but the performance disappointed. Conversely, SanDisk experienced a 7.4% surge as markets cheered its presentation outlining prospects driven by the growth of artificial intelligence.

In Asia, Seoul rose by more than 2% due to gains in chipmakers SK hynix and Samsung, which had been recovering from a selloff the previous month. The Seoul Kospi index had dropped about 40% between its June high and an intra-day low on August 6 but had since recovered more than 20%. Gains were also observed in Tokyo, where tech giants Kioxia, Advantest, Sony, and the technology investment firm SoftBank rallied.