This week, the stock market sloshed around as we received a handful of mixed economic reports. These data have a real impact on our portfolios, so let’s review what’s going on with the economy right now:
On the retail front, things started off on a shaky footing this week. A handful of major retailers released their April same-store sales, and the results weren’t encouraging. Kohl’s Corp. (KSS) and Nordstrom (JWN) both saw same-store sales fall compared with April 2015. Macy’s (M) reported a steeper drop in quarterly same-store sales than expected. A number of boutique retail stores also missed the mark, including Buckle Inc. (BKE) and L Brands Inc. (LB).
Then, on Friday the Commerce Department announce that retail sales rose 1.3% in April, which was higher than economists’ consensus forecast of 0.8% growth. Auto and gasoline sales were especially strong, rising 3.2% and 2.2% respectively. However, excluding auto and gasoline sales, retail sales rose 0.6%. Of that, online sales at Internet retailers were especially strong, increasing 2.1%.
The most encouraging sign is that most categories improved in April, except building materials. The good news is that consumers are still buying big ticket items, which is good news for the broader economy.
At the same time, the poor same-store sales results at brick and mortar stores is a problem. These lackluster results sparked an industry-wide selloff. There is a growing fear that there will be layoffs over the upcoming months as Amazon.com (AMZN) and other Internet retailers become more dominant.
Speaking of layoffs, on Thursday, the Labor Department reported that jobless claims in the latest week rose for the third straight week to 294,000. This is the highest level in 14 months. This steady rise in jobless claims is also raising fears that the disappointing April payroll report may indicate an extra cautious business community that continues to curtail spending.
The other news on Friday was that the Labor Department reported that the Producer Price Index (PPI) rose 0.2% in April. This followed two monthly declines in March and February. Economists were expecting the PPI to increase 0.3%, so wholesale inflation is still running below expectations. Wholesale food and energy prices rose 0.3% and 0.2%, respectively. The core PPI, which excludes food and energy, rose 0.3%. Over the past 12 months, the PPI has remained unchanged while the core PPI has risen 0.9%. Overall, there is no evidence of inflation that would cause the Fed to raise key interest rates anytime soon.
That’s all I have for you this week; I’ll be back online on Monday with your weekly ratings changes.
Have a great weekend,