While investors are rattled by escalating tensions between the U.S. and North Korea, the industry is more likely to hinge on something more pedestrian in the upcoming week, namely, how much U.S. consumers are actually fueling economic growth. Stocks finished down for the week Friday as the Dow Jones Industrial Average
declined 1.1%, the S&P 500 index
Fell 1.4%, and the Nasdaq Composite Index
Dropped 1.5%, after a rough period where saber-rattling between the U.S. and North Korea motivated a pullback from record high levels. The CBOE Volatility
Urged 55% within the week to finish at 15.51, largely thought of as a “normal” range of stock exchange volatility. Tuesday not only brings with it the Commerce Department’s U.S. retail sales data for July, but also a number of traditional retailers will cap off earnings season with their reports. U.S. retail sales logged declines for both May and June. With consumer spending estimated to fuel about two-thirds of the economy, Tuesday’s figures will be watched carefully. Economists surveyed by MarketWatch expect a 0.2% decline in July retail sales. It’s the growing disparity between how consumers feel about the economy and if they actually open up their wallets that is of concern to Brad McMillan, chief investment officer for Commonwealth Financial Network, in an interview. “Although there are high levels of consumer confidence, consumers still are not spending, so that gap between the walk and the talk is only getting more worrisome,” said McMillan. The previous reading for consumer spending showed expansion of less than 0.1 percent in June, its most anemic monthly growth since January 2016, continuing a steady downtrend that’s existed since March. At the same time, the previous reading for consumer confidence showed its second highest level in 16 years at 121.1 back in July. June’s reading was 117.3, which can be similarly near 16-year highs. “Spending growth is well below what it should be so that means one of two things: Either spending needs to grow faster or those polls are overstating how positive the consumer actually feels,” McMillan said. Adding to the debate that consumer confidence figures are just talk, Peter Boockvar, chief market analyst at the Lindsey Group, said they should be taken with a grain of salt, and what really matters is hard data on whether consumers are actually spending money. “That’s true with a lot of confidence numbers since the election: None of these have translated into actual expansion,” Boockvar said in an interview. In addition to retail sales data, Boockvar said he will be paying particularly close attention to Home Depot Inc..
Earnings on Tuesday as a measure of consumer spending. The analyst said Home Depot is the newest large traditional retailer that is caught in the crosshairs of online retail giant Amazon.com Inc..
Which expects revenue to continue to rise even though spending is cutting into profits. Read: Why it might be time to invest in the companies Amazon is destroying Other traditional retailers report earnings throughout the week include TJX Cos..
on Tuesday; Target Corp..
On Wednesday; along with Wal-Mart Stores Inc..
Ross Stores Inc..
L Brands Inc..
and Foot Locker Inc..
reporting on Thursday. On Wednesday, minutes from the Federal Reserve’s July policy assembly will be released but that’s become less of a market-moving event. Much of that has to do with speeches from central bank members that follow policy meetings, said Lindsey Group’s Boockvar, that doesn’t expect the FOMC minutes to significantly change the 36% likelihood of a rate increase in December. If anything, the minutes may provide some more clarity on the Fed’s plans to begin unwinding its $4.5 trillion balance sheet in September, said Commonwealth’s McMillan.
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