Here on the central coast of California, the month of June is fog heavy, always grey and cool in the morning. We call this habitual weather the “June Gloom.” The sunless mornings act like a damper on my energy. It takes a bit more juice to get me going. My inner sense suggests sleeping in a bit more, taking it easy is the way to go. Well, I rarely take the suggestion to sleep in (and my concierge service won’t allow it) and the juice to get my day going comes from my morning reading, although I do take it a bit easier, I must admit …
This morning, I had to work a bit harder when reading, which means I really didn’t get to take it easier. The reason I worked harder is that the news buried the helpful information about retail sales for May. The headlines and the opening paragraphs dominated the negative, but, underneath the weight of that, a more realistic picture emerged.
Retail sales last month were dragged down by a 2.2 percent drop in sales at gasoline stations after a decline of 1.4 percent in April.
Energy and food comprise a large portion of the retail numbers generated from the Department of Commerce. Simply, less money spent on either of these means more consumer discretionary spending. This translates into a leading indicator
Gasoline prices dropped 17 cents last month to $3.79 a gallon. Excluding gasoline, retail sales nudged up 0.1 percent after easing 0.1 percent in April. Cheaper gas pushes down measure of US wholesale prices by 1 percent, most in nearly 3 years.
And then we get to the good stuff, which is the US consumer is still spending money on the things that keep the economy rolling, and I don’t mean in a car.
Core retail sales, excluding autos, gasoline and building materials, ticked up 0.1 percent after a similar gain in April. Sales of electronics and appliances rose 0.8 percent and clothing store receipts advanced 0.9 percent. Sales at furniture stores rose 0.4 percent. Core sales correspond most closely with the consumer spending component of the government’s GDP report.
The market eventually sees through the mire of negativity, but as much as some claim the market looks forward, it seems to look backward, as it initially reacts to headlines and negative punditry. Leading indicators are what we want to see, and the one below is just such an indicator.
A third report showed applications for U.S. home mortgages, which includes demand for new loans and refinancings, rose 18 percent in the week ended June 8 to reach the highest level since 2009, the latest sign of a strong spring selling season.
The ripple effect of home buying and refinancing is strong in the US economy, and if many of those 18% applications come to fruition, expect a pop in the retail numbers in late summer or early fall. Look to the companies that service home remodels, furniture, and appliances. Finally, a reminder of what traders and investors are up against in today’s techno-market.
High-frequency trading (HFT) is a market-skewing, artificial form of speculation that places undo pressure on already fragile markets, which, by doing so, increases the risk of another flash crash or something much worse. HFT accounts for over 50% of all trading volumes, further distancing individual investors from the market and eliminating virtually any link between valuation and market price.
Trade in the day; Invest in your life
