Market Talk

US stocks rise slightly in a session that’s sent off-kilter by this morning’s July retail-sales report, which blasts a hole in the recovery theme.

DJIA rises 37 to 9399, S&P 500 adds 7 to 1013, Nasdaq Comp gains 11 to 2009. Late buying lifts indexes, which bounced around a lot during the session.

Retail sales fell in July, even with artificial demand from cash for clunkers, underscoring just how weak consumer demand remains.

Weekly jobless claims rise slightly, but the trend is more important; the longer they stay above 500,000, the weaker the economy remains.

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If this doesn't work, we're gonna need a cash for corn program.

Wal-Mart’s (WMT) 2Q results this morning marked the unofficial ending to earnings season, and when reflecting on corporate profits, several themes come to mind.

Corporate profits are way down from a year ago, but results have largely exceeded analysts diminished expectations, helping boost stock prices. Cost-cutting rather than top-line growth has also been the name of the game as companies are more likely to beat expectations because of layoffs and other streamlining efforts rather than higher revenue.

Take Wal-Mart as an example. Same-store-sales dropped 1.2%, while the retailer had expected sales to be flat to up 3%. WMT CFO Tom Schoewe said the company missed sales expectations because of a tough spending environment. But WMT posted 2Q results at the top end of the company’s guidance and ahead of Wall Street’s projection due to expense control and lower inventory, sending shares up nearly 2%.

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 Ed Welsch of Dow Jones Newswires writes:

That's no broken window, that's a boost to GDP right there, son.

Today’s July retail sales report provides a stark slap in the face for the bullish consensus of economists, who expected a strong boost to the headline number from the cash for clunkers program.

Evidently cash for clunkers did help auto sales; it was the spending on everything else that stunk up the joint. Overall sales fell by 0.1%, but fell by a much sharper 0.6% excluding auto sales.

Perhaps economists wouldn’t be surprised that an artificial boost in one sector comes with a cost to other sectors if they were familiar with the 1850 work “That Which is Seen, and That Which is Not Seen,” by French economist Frederic Bastiat (thanks to Joan McCullough, strategist of East Shore Capital Partners, for drawing our attention to his work this morning.)

In his parable of “The Broken Window,” Bastiat points out that the economic activity generated when a person spends money on replacing destroyed things (such as broken windows or old cars) comes with a hidden cost, or “that which is not seen.”

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We're gonna need a "cash for produce" plan.

This morning’s data blast gave the bulls a real knock between the horns.

 The weekly jobless claims were essentially flat (up 4,000), but of course the problem with that is that the new bull-market thesis needs that number to be trending down.

But the retail sales report for July? Now that was a stunner (although it should not have been.)

“The decline in retail sales is quite startling to say the least,” Miller Tabak’s Dan Greenhaus writes.

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Bulls aim for a hearty heaping of follow-through to yesterday’s stealthy rally, with a more clear catalyst today as economies in Europe show signs of perking up.

Fed’s getting credit from some corners for helping to fuel yesterday’s rally, but that seems like a tough sell. Stocks were in full rally mode before the FOMC said a word, and stating the US economy appears to be “leveling off” is no startling revelation. Reassurance from the Fed regarding the economy is pretty trivial – the central bank never saw this recession coming in the first place.

Buying begets more buying now, so might be safe for bears to just take a knee.

July import prices, retail sales and weekly jobless claims all due at 8:30am; June business inventories out at 10:00am.

S&P futures up 11; Dow futures up 96; Ten-year lower, yield at 3.73%. Crude also enjoying the ebullience; up nearly $2 and above $72/barrel.