MARKET SNAPSHOT: North Korea Could Take Back Seat As Stocks Face Big Week For Consumer Data
August 12 2017 - 8:16AM
Dow Jones News
By Wallace Witkowski, MarketWatch
U.S. retail sales data, retailer earnings put spotlight on
consumer health
While investors have been rattled by escalating tensions between
the U.S. and North Korea, the market is more likely to hinge on
something more pedestrian in the coming week, namely, how much U.S.
consumers are actually fueling economic growth.
Stocks finished down for the week
(http://www.marketwatch.com/story/sp-500-poised-for-worst-week-since-november-as-global-tensions-persist-2017-08-11)
Friday as the Dow Jones Industrial Average declined 1.1%, the
S&P 500 index dropped 1.4%, and the Nasdaq Composite Index fell
1.5%, following a rough period where saber-rattling between the
U.S. and North Korea inspired a pullback from record high levels.
The CBOE Volatility urged 55% over the week to finish at 15.51,
largely considered to be a "normal" range of stock market
volatility.
Tuesday not only brings with it the Commerce Department's U.S.
retail sales data for July, but also a number of traditional
retailers will cap off earnings season with their reports. U.S.
retail sales logged declines
(http://www.marketwatch.com/story/us-retail-sales-fizzle-out-in-june-2017-06-14)
for both May and June.
With consumer spending estimated to fuel about two-thirds of the
economy, Tuesday's figures will be watched closely. Economists
surveyed by MarketWatch expect a 0.2% decline in July retail
sales.
It's the growing disparity between how consumers feel about the
economy and whether they actually open up their wallets that's of
concern to Brad McMillan, chief investment officer for Commonwealth
Financial Network, in an interview.
"Even though there are high levels of consumer confidence,
consumers still aren't spending, so that gap between the walk and
the talk is only getting more worrisome," said McMillan.
The last reading for consumer spending
(http://www.marketwatch.com/story/consumer-spending-inches-up-01-in-june-2017-08-01)
showed growth of less than 0.1% in June, its most anemic monthly
growth since January 2016, continuing a steady downtrend that's
existed since March. At the same time, the last reading for
consumer confidence
(http://www.marketwatch.com/story/consumer-confidence-back-near-16-year-high-2017-07-25)
showed its second highest level in 16 years at 121.1 back in July.
June's reading was 117.3, which is similarly near 16-year
highs.
"Spending growth is well below what it should be so that means
one of two things: Either spending needs to grow faster or those
surveys are overstating how confident the consumer really feels,"
McMillan said.
Adding to the argument that consumer confidence figures are just
talk, Peter Boockvar, chief market analyst at the Lindsey Group,
said they should be taken with a grain of salt, and what really
matters is hard data on whether consumers are actually spending
money.
"That's the case with a lot of confidence numbers since the
election: None of them have translated into actual growth,"
Boockvar said in an interview.
In addition to retail sales data, Boockvar said he'll be paying
particularly close attention to Home Depot Inc. (HD) earnings on
Tuesday as a measure of consumer spending. The analyst said Home
Depot is the latest large traditional retailer that's caught in the
crosshairs of online retail giant Amazon.com Inc.(AMZN), which
expects revenue to continue to rise even though spending is cutting
into profits
(http://www.marketwatch.com/story/amazon-earnings-forecast-shows-spending-expected-to-continue-2017-07-27).
Read: Why it might be time to invest in the companies Amazon is
destroying
(http://www.marketwatch.com/story/why-it-might-be-time-to-invest-in-the-companies-amazon-is-destroying-2017-07-17)
Other traditional retailers report earnings during the week
include TJX Cos. (TJX) on Tuesday; Target Corp.(TGT) on Wednesday;
along with Wal-Mart Stores Inc.(WMT), Gap Inc.(GPS), Ross Stores
Inc.(ROST), L Brands Inc.(LB), and Foot Locker Inc.(FL) reporting
on Thursday.
On Wednesday, minutes from the Federal Reserve's July policy
meeting will be released but that's become less of a market-moving
event. Much of that has to do with speeches from central bank
members that follow policy meetings, said Lindsey Group's Boockvar,
who doesn't expect the FOMC minutes to significantly change the 36%
probability of a rate hike in December
(http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/).
If anything, the minutes may provide some more clarity on the
Fed's plans to begin unwinding its $4.5 trillion balance sheet in
September, said Commonwealth's McMillan.
(END) Dow Jones Newswires
August 12, 2017 08:01 ET (12:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.