Consumer Reports: Retail Sales, Sentiment, and Earnings

Investors in the week ahead are set to receive updates on the health of U.S. retail sales, as well as consumer sentiment, as earnings season winds down.

The pace of economic data will shift into high gear with a mid-week report on April’s advanced monthly retail sales figures from the U.S. Census Bureau after the prior month drew an upbeat picture of consumer purchasing power.

Wednesday, May 15

• Retail Sales (Apr)

  (Click on image to enlarge)

U.S. retail and food services sales for March 2019 rose 1.6% over the prior month to US$514.1bn, an increase of 3.6% over the same year-ago period.

Jefferies economists Ward McCarthy and Thomas Simons noted that rather than “read too deeply into the month-to-month swings, we think it is more valuable to look at the average for the quarter.” 

As of March. the three-month annualized increase in the control group was 2.6%, compared with a rise of only 0.7% as of December 2018. 

McCarthy and Simons continued that while retail sales ended 2018 “abysmally,” it began 2019 “extraordinarily,” with the March numbers suggesting personal consumption during the first-quarter were “quite solid.” 

They added that Q1 is typically “the weakest quarter of the year for GDP growth, but consumption should help keep it from falling too far below the trend for the rest of the year.”

The buoyant tone should bode well for retailers’ earnings, and among the results in the week ahead, market participants are due to receive:

Tuesday, May 14

• Container Store Group (NYSE: TCS) (Q4’19)
• Ralph Lauren (NYSE: RL) (Q4’19)

Wednesday, May 15

• Jack in the Box (NASDAQ: JACK) (Q2)
• Macy's (NYSE: M) (Q1)

Thursday, May 16

• Walmart (NYSE: WMT) (Q1)

Against this backdrop, U.S. stocks have been sliding recently, amid escalating jitters about trade talks with China.

While the S&P 500 was off a little more than 0.5% intraday Friday, the SPDR S&P Retail ETF (NYSEARCA: XRT), which has among its top holdings auto-related stocks Carvana (NYSE: CVNA), CarMax (NYSE: KMX) and Advance Auto Parts (NYSE: AAP), has seen a drop in its value of around 1.40% on the day to roughly US$43.80, according to the IBKR Trader Workstation.

In fact, prices of XRT have declined by over 5% since May 3, offsetting gains that were achieved following its 26.7% drop over the August-December 2018 period.

(Click on image to enlarge)

Meanwhile, the value of the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY), which has among its top holdings Amazon.com (NASDAQ: AMZN) and Home Depot (NYSE: HD), has come down close to 4.3% from its latest 52-week high set in late April.

(Click on image to enlarge)

Elsewhere, the University of Michigan will provide further color about the mood of consumers in its May survey, due out ahead of the weekend.

Friday, May 17

• University of Michigan – Survey of Consumers (May)

U. Michigan’s surveys of consumers chief economist Richard Curtin observed that consumer sentiment has “moved sideways,” since U.S. President Donald Trump first entered office.

The Sentiment Index has averaged 97.2 in the past 28 months, identical to the April 2019 reading and has remained between 95.0 and 99.0 for 21 of the past 28 months.

(Click on image to enlarge)

Curtin said that the last time consumer sentiment was “as favorable for as long a period of time was during the late stages of the Clinton expansion.”

Overall, he added the data suggests that inflation-adjusted personal consumption expenditures will grow by 2.5% in 2019.

Investors in the week ahead will also likely be eyeing other economic releases on the calendar, including Import/Export Prices, Industrial Production, Housing Starts and Weekly Jobless Claims.

A long list of Federal Reserve speakers are also on tap, including vice chair for supervision Randal Quarles’ congressional testimony, as well as other regional appearances by Kansas City Fed chief Esther George, New York Fed president John Williams and Fed vice chair Richard Clarida, among others. 

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.