Merchandising mayhem

Merchandising mayhem.  Stocks pulled back yesterday on worrisome retail earnings.  Investors were still wondering whether we will ever see a comprehensive trade deal with China.
 
MY TWO CENTS
1.  Gimme a sign.   Yesterdays chaos in the retail sector is a stark reminder of a topic which I often cover in an almost mantra-like fashion.  The consumer is everything.  Reminder:  consumption makes up over two thirds of US GDP and its continued strength has been the primary driver for the ongoing economic expansion.  Businesses and consumers are driven by different forces in their purchase decisions.  Businesses make rational decisions based on their assessments of current and forecasted sales and market conditions.  On that front, businesses have been slowing their investments for some time now and sentiment, particularly in manufacturing, has been weakening, as evidenced by PMI numbers.  Consumers on the other hand make more emotional decisions, changing their outlooks quite frequently.  Of course, being employed is a big factor and with unemployment rates near all-time lows, a consumers’ biggest fear is… fear of losing that job.  The trade war, a steady stream of weak economic data, growing corporate and government debt, struggles in the EU, and a broken legislature have not been enough to worry the consumer, as evidenced by consumer confidence numbers which, while a bit weaker of recent, still remain in healthy territory.  There are other signs worth watching when pondering the health of consumption.  One of those is retail sector performance, and this is the sector’s big week, with most of the retail giants delivering their third quarter results.  Retailers historically experience a surge in the fourth quarter as a result of holiday purchases but that trend is shifting as consumers rely more heavily on online shopping where “Black Friday” deals start well before the onset of the current quarter.  This makes Q3 retail earnings more and more important.  Yesterday, Home Depot and Kohl’s announced earnings.  Home Depot beat earnings estimates and missed on revenues while Kohl’s missed both, by a mile.  Both retailers offered weak forward guidance.  The results sent not only their stocks, but the entire retail sector into a tail spin.  Could this be a canary in the coal mine for consumers?  This week’s earnings and next week’s official Black Friday will help paint a better picture.
2.  Attention to tension.  Negotiations with China appear to be continuing but some of the signs, or lack thereof, are starting to worry investors.  Despite Larry Kudlow’s statement last weekend, all of the other “official” information appears to be pointing to a large gap between the demands of the two sides… if one parses the text carefully.  Bond investors are certainly expressing their discomfort as evidenced by the recent not-so-highly-publicized flattening of the yield curve.  Just yesterday in a cabinet meeting, President Trump announced that he would raise more tariffs if China did not agree to a deal.  That is not the kind of statement we would expect when the two sides are down to the “short strokes” of a deal, as Kudlow put it.  Last night, WHILE YOU SLEPT, the Senate passed a bill supporting the Hong Kong protestors and warning China against violence.  The move provoked an angry response from China, as expected.  China needs a deal as its economy is struggling, however there is very little political pressure on President Xi, who is appointed for life.  Trump is under political pressure as we enter an election year.  Though these latest developments have thrown some cold water on the latest equity rally, investors remain hopeful that some deal can be reached, as pullbacks appear to be small, so far.
THE MARKETS
 
Stocks closed mixed on weak retail earnings and trade deal uncertainty.  The S&P500 slipped by -0.06%, the Dow Jones Industrial Average dropped by -0.36%, the Russell 2000 climbed by +0.37%, and the NASDAQ Composite Index advanced by +0.24%.  Bonds climbed and 10-year treasury yields fell by -3 basis points to 1.78%.
 
WHAT’S NXT
 
– The minutes from last month’s FOMC meeting will be released this afternoon at 2:00 PM EST.  Traders will look to understand the Fed’s logic behind their new wait and see strategy.
– US Crude Oil Inventories are expected to have fallen to 1.149 million barrels from last week’s 2.219 million.
– This morning Lowe’s and Target both beat estimates and L Brands will announce after the bell.

IMPORTANT DISCLOSURES.

Muriel Siebert & Co., LLC is an affiliated broker/dealer of the public holding company, Siebert Financial Corporation, which also owns Siebert AdvisorNXT, LLC. Siebert AdvisorNXT, LLC is a registered investments advisor (RIA) with the SEC and with state securities regulators. We may only transact business or render personal investment advice in states where we are registered, filed notice or otherwise excluded or exempted from registration requirements. Investment Advisor products are NOT insured by the FDIC, SIPC any federal government agency or Siebert’s parent company or affiliates.

You are being provided this Market Note for general informational purposes only. It is not intended to predict or guarantee the future performance of any security, market sector or the markets generally. This Market Note does not describe our investment services, recommendations or market timing nor does it constitute an offer to sell or any solicitation to buy. All investors are advised to conduct their own independent research before making a purchase decision. This Market Note is to provide general investment education and you are solely responsible for determining whether any investment, security or strategy, or any other product or service, is appropriate for you based on certain investment objectives and financial situation. Do not use the information contained in this email as a basis for investment decisions. You should always consult your investment advisor and tax professional regarding your investment situation before investing. The charts and graphs are obtained from sources believed to be reliable however Siebert AdvisorNXT does not warrant or guarantee the accuracy of the information. Any retransmission, dissemination or other use of this email is prohibited. If you are not the intended recipient, delete the email from your system and contact the sender. This is a market commentary, not research under FINRA Rule 2210 (b)(1)(D)(iii) and FINRA Rule 2210 (c)(7)(C).

© 2021 Siebert AdvisorNXT All rights reserved.