The US consumer is proving to be resilient in the face of higher inflation with a Bank of America report suggesting that negative earnings reports in the retail sector is not indicative of a imminent economic disaster.
Last week the Dow, S&P 500 completed their best weeks since November 2020
On Friday, the Dow jumped 575.77 points, or nearly 1.8%, to 33,212.96. The S&P 500 rose about 2.5% to 4,158.24.
With The tech-heavy Nasdaq index the outperformer, helped by strong earnings from software companies and a fall in the 10-year Treasury yield. It was ended the day up 3.3% to reach 12,131.13.
A report showing inflation slowing a bit helped stocks to rise on Friday. The core personal consumption expenditures price index rose 4.9% in April, down from the 5.2% pace seen the previous month. This particular report is watched closely by the Federal Reserve when setting policy.
Meanwhile, the University of Michigan’s gauge of consumer sentiment fell to its lowest level in more than 10 years.
Now All eyes remain firmly on the US consumer as they adjust to a more normalised post Covid economic reality.
This week Bank of America weekly economic Research report offered a word of optimism. “Remember”, it said “the equity market is not the economy.”
The report cites recent stock market trends that might be spooking investors, including negative earnings reports from retail giants Walmart, Amazon, and Target.
Now the S&P Retail Select Industry Index has fallen 39% since a November peak, with an especially dramatic plummet in May.
“What is behind the selloff and what does it mean for the consumer outlook?” the report asks. The answer? Companies might just be catching up to consumer demand fluctuations as the economy continues to rebalance after the pandemic’s initial lockdown and gradual easing of restrictions.
“With spending on goods shifting from boom to mild correction, some companies may have been caught off guard,” the report states. That’s especially true for the online retail sector.
“The share of spending online has grown every year since the sector got going in 2000,” says the report. That sector enjoyed a jolt at the start of the pandemic, but now faces flat spending for the first time.
Further the report states – The negative earnings reports in the retail sector isn’t indicative of imminent economic disaster,
All 11 major sectors of the S&P 500 rose, with consumer discretionary, tech and real estate notching the biggest percentage gains
Within the sectors best performing themtaics were hydrogen stocks, EV pLayers like Tesla, lithium stocks like Livent & Albemarle
On Friday, new data showed that U.S. households boosted spending for a fourth straight month, though they reached deeply into savings to do so.
The data, alongside some strong earnings pushed shares of retailers sharply higher. Dollar Tree, Ulta Beauty and Ross Stores were among the week’s biggest winners in the S&P 500, gaining at least 20% a piece.
Trading volumes were light however ahead of the long weekend, with U.S. stock markets closed on Monday in observance of Memorial Day
We have a Big week on the US economic calendar including five members of the Federal Reserve’s Open Market Committee (FOMC), which makes inflation rate decisions, are set to speak, with the expectation “They could shed some light on the policy outlook after the next two meetings.”
On the asx today The SPI futures are pointing to 1.2 per cent gain
Watch out today for Melbourne-based baby formula company Bubs Australia (ASX:BUB) which has secured a deal to send more than a million tins to the United States to ease a nationwide shortage, with President Joe Biden taking to Twitter to endorse the deal over the weekend
Gold has gained $3.40 or 0.2 per cent to US$1857 an ounce. Silver was up $0.13 or 0.6 per cent to US$22.10 an ounce.
Oil has added $0.98 or 0.9 per cent to US$115.07 a barrel.
Bitcoin futures were down 1.6%.
There are eight companies set to trade without the right to its dividend.
Coronado Global Resources (ASX:CRN) is paying 11.9289 cents unfranked
Dalrymple Bay (ASX:DBI) is paying 4.5675 cents unfranked
Elders (ASX:ELD) is paying 28 cents 30 per cent franked
Gryphon Capital (ASX:GCI) is paying 0.82 cents unfranked
Kkr Credit Income Fund (ASX:KKC) is paying 1 cent unfranked
Perpetual Credit Income Trust (ASX:PCI) is paying 0.4607 cents unfranked
Qualitas Real Estate Income Fund (ASX:QRI) is paying 0.8159 cents unfranked
360 Capital Enhanced Income Fund (ASX:TCF) is paying 3 cents unfranked
One Australian Dollar at 7:00 AM has strengthened since Friday, buying 71.63 US cents (Fri: 70.99 US cents), 56.82 Pence Sterling, 91.03 Yen and 66.76 Euro cents.