Retail Sales Sustain Winning Momentum: ETF & Stock Bets

U.S. retail sales maintained the wining momentum initiated in September, validating the solid growth momentum in the country. Sales in October grew 0.8% last month sequentially, after an upwardly revised 1% rise in the earlier period and surpassed market expectations of 0.6% growth. On a year-over-year basis, sales grew 4.3% following an upwardly revised 3.2% jump in September.

Higher auto sales were behind this upbeat reading. Sales at miscellaneous store retailers, gasoline stations, non-store retailers and sporting goods and hobby music stores also recorded considerable sales growth. Among the losers, sales at furniture stores and restaurants were down 0.9% and 0.7%, respectively.

Accelerating wage growth can be credited for greater consumer confidence. Notably, the country “extended its record private sector hiring streak in October as wage growth accelerated to its fastest pace since 2009“ as per ft.com.

With upbeat retail sales data, chances of a Fed rate hike in December jumped to 85.8% from 81.1% prior to the release of the data. To make the mood merrier, the preliminary data of the University of Michigan's consumer sentiment for the U.S. jumped to 91.6 in November from a final reading of 87.2 in October, marking the best reading since June.  Inflation expectations also increased, especially after Trump win (read: ETF Asset Flow in Election Week).

Market Impact

The market reaction to September retail data was mixed as it strengthened chances of a rate hike this year end. SPDR S&P Retail ETF (XRT - Free Report) and PowerShares Dynamic Retail ETF (PMR - Free Report) were off about 0.4% and 0.1% respectively on November 15, and VanEck Vectors Retail ETF (RTH - Free Report) was up about 0.6%. Odds of a gradual end to easy money inflows and the ongoing earnings releases probably had a mixed impact on those funds (read: How Are Retail ETFs Shaping up For Q3 Earnings?).

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