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Today’s title might be confusing for those of you who grew up outside North America. Last licks is a playground idiom meaning “final turn” or “last opportunity”, and it comes up in a variety of games. With major retailers like Home Depot (HD), Target (TGT), and Walmart (WMT) reporting over the coming three days, we get a final chance to see whether the stasis that has pervaded much of this earnings season and current quarter overall will persist.

So far, 92% of S&P 500 (SPX) companies have reported earnings for the quarter. In baseball terms, we’re in the bottom of the ninth inning of a tie game. The retailers have a chance to break the tie. Based upon the solid results issued by a wide range of consumer stocks one might think that retailers should be in good shape. We learned that many important companies favored by consumers were able to pass along higher prices to their customers without penalty. The unemployment rate is only 3.4%, meaning that the vast majority of people who want a job have one. People who are employed can afford to buy what they’d like, especially when average hourly earnings rose 0.5% last month. That’s not good for an inflation-fighting Federal Reserve, but good for the companies themselves.

 But the University of Michigan survey dealt us a real curveball on Friday. We described the results as “lousy” in a piece published that morning, and that description holds up in hindsight as well. The sentiment was 57.7 vs. a prior 63.0 (and 63.5 consensus), Expectations were 53.4 vs a prior 60.8, 1-Year Inflation was 4.5% vs. 4.4% (though better than the 4.6% consensus), while 5-10 Year Inflation matched a 12-year high of 3.2% (vs. 2.9% prior and 3.0% expected). There is no way to sugarcoat those numbers. 

Bearing in mind that the consumer stocks’ quarter ended on March 31^st and the retailers ended on April 30^th, we will get an important glimpse into whether key retailers felt a decline in sentiment over that timeframe. It is one thing for people to express negative sentiment in a survey, another for them to express it at a store’s cash register. 

Has TGT fully fixed its inventory problems? Are consumers downshifting from TGT to WMT? Are higher rates affecting the housing cycle sufficiently to cool spending at HD and Lowes (LOW)? We’ll know soon enough whether retailers’ last licks sink or save the relative tie game of first-quarter earnings. 

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