Positive Retail Sales Surprise - Analyst Blog
14 Outubro 2011 - 6:36AM
Zacks
Favorable data on consumer spending and reassuring noise from
Europe will likely put stocks in a positive mood today. We got
better-than-expected Retail Sales data this morning, which provides
reassuring evidence of resilience in consumer spending. Lingering
positivity from last night's blowout results from
Google (GOOG) will likely rub off on the
technology sector, offsetting worries about banks highlighted by
J.P. Morgan's (JPM) results.
But let's talk about Europe first, as they seem to be making all
the right noises about addressing the common currency's problems.
The finance officials of the G-20 countries meeting in Paris are
discussing the outlines of a credible-looking plan. The plan
includes requiring banks to raise additional capital, deeper
'haircuts' for holders of Greek bonds (aka orderly Greek default)
and increased lending capacity for the IMF and the Euro-zone rescue
fund.
The plan may get finalized in the coming days to be considered by
the G-20 summit meeting on November 3. A plan along these lines
would have the potential to tackle the European problem in a
durable and comprehensive fashion. It is perhaps premature to be
optimistic at this stage, but at least they are discussing the
appropriate measures to address the problem.
On the domestic front, we got a favorable reading on consumer
spending. September Retail Sales increased a better-than-expected
1.1%, after a 0.3% increase in August. The August growth rate is a
positive revision from the originally reported 'unchanged' reading.
Since the headline monthly retail sales number includes the sale of
automobiles, gasoline and building materials, which fluctuate from
month to month, excluding these items gives us a better measure of
the underlying trend in retail sales. The so-called 'core' retail
sales also increased a better-than-expected 0.6%, after a 0.4%
increase in August. This is the best retail sales reading since
March this year.
This report is admittedly not a perfect proxy for consumer spending
since it only includes sales of 'goods' at retail establishments
and leaves out the much bigger consumer outlays on services. But it
nevertheless provides valuable clues to trends in consumer
spending, which is the backbone of the U.S. economy. This shows
that the U.S. economy ended the third quarter on a fairly positive
note, particularly on the consumer spending front. I would expect
this report to give another nudge to the recent emerging trend to
positive revisions to third quarter GDP growth estimates.
On the earnings front, we have Google's blowout results from after
the close on Thursday, with the search giant handily beating
expectations.
J.B. Hunt Transport (JBHT), the
trucking operator, came out with a modest EPS beat on in-line
revenue numbers after-market on Thursday. This morning, we have
in-line earnings from
Mattel (MAT), the toy maker,
on modestly better-than-expected top-line results.
It is still early going on the earnings front. The next two weeks
should give us a very good idea of where we stand with the outlook
for corporate profitability front. If only the Europeans can come
out with something along the lines of what is being contemplated in
the G-20 meeting, we will have the building blocks of a solid
market rally.
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
HUNT (JB) TRANS (JBHT): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
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