The S&P 500 gained 0.8% on Friday, supported by an upside surprise in the retail sales report for September, better-than-expected earnings news, and improving technical factors. The Dow Jones Industrial Average rose 1.1%, while the Nasdaq Composite increased just 0.5% and the Russell 2000 fell 0.4%. 

Briefly, total retail sales in September were up 0.7% m/m (Briefing.com consensus -0.3%), reflecting resilient consumer demand amid higher prices. Amazon.com (AMZN 3409.02, +109.16, +3.3%) took the news in stride, carrying the S&P 500 consumer discretionary sector (+1.8%) to a first-place finish. 

The financials sector (+1.5%) was next in line amid higher Treasury yields and earnings-driven gains in Goldman Sachs (GS 406.07, +14.87, +3.8%) and Charles Schwab (SCHW 80.90, +2.79, +3.6%). The industrials sector (+1.0%) benefited from J.B. Hunt Transport's (JBHT 190.55, +15.31, +8.7%) better-than-expected earnings report. 

Conversely, the counter-cyclical consumer staples (-0.2%), utilities (-0.2%), and communication services (-0.1%) sectors finished in negative territory. The latter was pressured by Facebook (FB 324.76, -3.77, -1.2%), which was added to the Tactical Underperform List at Evercore ISI.

Notably, the 10-yr yield rose six basis points to 1.58%, but that didn't upset the growth stocks too much presumably because it remained below recent highs. The Russell 1000 Growth Index (+0.8%) outpaced the Russell 1000 Value Index (+0.6%) in percentage terms. 

On the technical side, the S&P 500 increased its distance above its 50-day moving average (4437) after closing above the key technical level yesterday. This positive price action was likely viewed as a good indicator among traders.   

In vaccine news, an FDA advisory committee unanimously recommended Johnson & Johnson's (JNJ 161.30, +1.19, +0.7%) booster COVID-19 shot for people 18 and older. The FDA, however, is reportedly delaying a decision on Moderna's (MRNA 324.21, -7.67, -2.3%) vaccine for the 12-17 age group to review the risks of a rare heart condition.

The 2-yr yield rose five basis points to 0.40%. The U.S. Dollar Index finished little changed at 93.94. WTI crude futures rose 1.2%, or $0.98, to $82.26/bbl.

Reviewing Friday's economic data, which featured the Retail Sales report for September:

• Total retail sales in September were up 0.7% month-over-month (Briefing.com consensus -0.3%) following an upwardly revised 0.9% increase (from 0.7%) in August. Excluding autos, retail sales jumped 0.8% month-over-month (Briefing.com consensus +0.4%) following an upwardly revised 2.0% increase (from 1.8%) in August.
  • The key takeaway from the report is the recognition that the broad-based sales increases reflect a rebound from some of the Delta-related restraint shown in August and presumably price increases that are a byproduct of supply chain constraints and higher transportation costs.
• The preliminary October University of Michigan Index of Consumer Sentiment dropped to 71.4 (Briefing.com consensus 73.5) from the final reading of 72.8 for September, leaving it pinned near the lows that were registered last year following the shutdown of the economy to combat the spread of COVID.
  • The key takeaway from the report is the finding that confidence in economic policies is fading regardless of political affiliation, as well as across all age, income, and education subgroups.
• Business inventories increased 0.6% m/m in August (Briefing.com consensus 0.7%) following an upwardly revised 0.6% increase (from +0.5%) in July.
• Import prices increased 0.4% in September after decreasing 0.3% in August. Excluding oil, import prices were flat after decreasing 0.1% in August. Export prices increased 0.1% after increasing 0.4% in August. Excluding agriculture, export prices increased 0.3% after increasing a revised 0.3% (from 0.2%) in August.

Looking ahead, investors will receive Industrial Production and Capacity Utilization for September, the NAHB Housing Market Index for October, and Net Long-Term TIC Flows for August on Monday. 

• S&P 500 +19.0% YTD
• Nasdaq Composite +15.6% YTD
• Dow Jones Industrial Average +15.3% YTD
• Russell 2000 +14.7% YTD