Market Talk

Plenty of cross-currents at work today, with one being the different tales we saw in retail this morning — first in Best Buy’s weak fiscal 3Q results, and then a better-than-expected November retail sales report.

The November government report looked encouraging, with notable increases in department stores, apparel, books, music, hobbies, sporting goods and such. But a lot of the gain also came from higher gasoline prices (gas station sales up 4%), while home improvement, autos, furniture and electronics & appliances were all down vs October.

The electronics & appliance decline certainly fits in with the Best Buy story, but what’s interesting here is the fact that it was Best Buy that turned in such a dud quarter. The brand is ubiquitous, and has been one of the most dominant retailers out there during the past several years. Continue reading…

As it turns out, our hunch was correct that October wholesale inventories would come in higher than expected. Nothing extraordinarily insightful behind that call, just an observation that both wholesale and business inventories have been surpassing (by a rather wide margin) economists’ expectations since July.

The general perception is that these bulkier-than-expected inventory gains are positive — they’re viewed as an indication that confidence in future sales prospects is goading companies into more inventory building. We’re skeptical, for a couple reasons, and have another hunch — that at least some of these larger-than-expected inventory gains are unintentional, and could eventually lead to another round of liquidation if demand doesn’t catch fire. Continue reading…

US stock futures down slightly premarket, following some weakness in European markets and in the euro. The single currency floating
around its overnight lows now, dancing above and below the $1.28 level.

A bit of decent news on the economic front this morning. Consumer prices rose for the first time in four months on the back of higher energy prices. But underlying inflation remains tame. CPI rose 0.3% in July from a month earlier, in line with economists expectations. And core consumer prices, which strip out changes in energy and food prices, rose by just 0.1%.

U.S. retail sales also rose for the first time in three months, increasing 0.4% in July from a month earlier. The gain, which was in line with expectations, was fueled by cars and gas. A positive number is definitely a bright spot, especially considering the past few months of declines, but there were only four increases among the 12 retail categories, representing some cause for concern.

Not exactly robust numbers, but definitely better readings than the slew of poor economic numbers we’ve seen over the last few weeks.

Additionally, Reuters/Univ of Michigan’s first look at August consumer sentiment due at 9:55am ET; and May business inventories at 10:00am.

Oil’s stabilized just below $76/barrel, gold a little lower. S&P futures down 2.70; 10-yr note higher, yield at 2.71%.

Economy's improving? Care to bet on that?

It hasn’t exactly been a busy week on the economic front, but the reports that have come out all point toward an improving economy.

Coming off last Friday’s better-than-expected monthly jobs data, Wednesday’s report on wholesale inventories showed an unexpected rise in October. Additionally, an increase in weekly jobless claims was offset by a drop in continuing claims and the trade deficit also improved.

Today, several reports show the consumer is recovering. Retail sales rose nearly twice as much as economists were expecting. The University of Michigan/Reuters consumer sentiment index increased much more than originally estimated. And business inventories rose 0.2% in October, marking the first increase since August 2008.

These surprisingly positive economic reports have prompted some economists to boost their 4Q growth prospects, Justin Fox writes at Time’s Curious Capitalist blog. JPMorgan and Credit Suisse each raised 4Q GDP views to 4.5% from 3.5% and Barclays boosted its forecast to 4.5% from 4% and expects 5% growth in 1Q10.

“Growth in excess of 4%, if it lasted for a few quarters, could start to make this feel like an actual recovery. With, you know, hiring and stuff,” Fox says. “I’ll believe it when I see it, but just be warned: Things might really be getting better.”

Continue reading…