This week brings another round of earnings paired with the critical producer price and consumer price indices. The results of this kind of economic data may prove to be the proverbial straws following the latest period of consolidation in the market. Of course, there is also a possibility that improved earnings and positive economic data could support the recent arguments that recovery is not just a distant mirage. That kind of positivity could bring investors back on the S&P futures bandwagon and move the market higher; however, there may be some lingering bumps in the road.
Retail sales data came in slightly better than anticipated posting another month of slight gains. This is being attributed to the rising prices at the pump. Excluding automobile sales, the retail number came in below analysts’ expectations. Consumers are likely primed to spend less during the back-to-school shopping season as job losses and credit issues still loom. The Producer Price Index gained 1.8 percent – more than analysts polled by Reuters had expected.1 It is possible that these gains – the highest since November of 2007 – will end up being passed along to consumers. Today’s Consumer Price Index (CPI) showed a month-on-month increase of 0.7 percent.2 Core CPI data matched expectations, climbing 0.1 percent. Like retail sales, gains may have been helped along by gas prices; but the flat food prices should temper inflation debates. Overall, this economic report landscape appears less important to headlines than the overwhelming response to earnings data.
Financial firms and tech giants may have led the way in recent gains following better-than-expected second quarter results. The mentality may be that if these companies appear to be recovering, then everyone stands a chance of seeing stability – or even gains. Coupling with the recent downward pressure on oil prices, the market appeared to be unable to shed the mantle of delayed recovery. A continued bias towards positive news may spur the possibility of a perceived economic turnaround and give this market a leg up.
1 http://www.reuters.com/article/reutersINCOnlineReport/idUSTRE56D2ZY20090714
2 http://money.cnn.com/2009/07/15/news/economy/cpi_consumer_price_index/index.htm?postversion=2009071508
Past Performance is Not Indicative of Future Results.
Past Performance is Not Indicative of Future Results.
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