Yesterday morning, the Key Inflation Data Release came out before the open and curbed early selling pressure. The gist was: there is no inflation, which means the accommodative Fed remains accommodative. In fact, there is no doubt the Consumer Price Index (CPI) coming in at 0.1% probably adds more pressure to cut rates.
However, there are several areas of our daily lives where prices are going through the roof.
% Spending | Category | 1 Year Change |
7.2% | Medical Care | 5.1% |
7.8% | Rent | 3.8% |
24.1% | Owner | 3.3% |
6.2% | Food Away from Home | 3.1% |
3.8% | Gasoline | 12.8% |
The Message of the Market
The S&P finished fractionally lower and down for the first Thursday since before Thanksgiving, but there was never any sense of panic.
S&P 500 Index | -0.16% | |
Communication Services (XLC) | +0.02% | |
Consumer Discretionary (XLY) | -0.17% | |
Consumer Staples (XLP) | +0.59% | |
Energy (XLE) | -0.31% | |
Financials (XLF) | -0.03% | |
Health Care (XLV) | -0.47% | |
Industrials (XLI) | -0.56% | |
Materials (XLB) | -0.36% | |
Real Estate (XLRE) | +0.61% | |
Technology (XLK) | -0.27% | |
Utilities (XLU) | +1.11% |
I continue to take great pains to point out 100 and 200-point swings on the Dow Jones Industrial Average (DJIA are no cause for alarm, as the swings are less than the historical average and historical up or down moves. That’s why the CBOE Volatility Index (VIX), a gauge of volatility, has been well below the spike to 24.5 last summer; it remains a million miles below the all-time high of 79.0 back on October 20, 2008.
After the Close
New Hotshot Names Posting Powerful Financial Results:
- Nvidia (NVDA)
- Roku (ROKU)
- Expedia (EXPE)
Old Hotshot Names Rallying on Okay Earnings:
- Mattel (MAT)
Portfolio Approach
The market has been down in four of the last five Fridays, as investors prefer to build some cash ahead of potentially bad news from China.
Day two of the new coronavirus evaluation method yielded 4,823 news cases, well below the 15,000, which was a shocker on Thursday.
Today’s Session
Yesterday, the rally attempt faded after a note from the Federal Reserve that it would start to curtail its repo intervention. The news was inevitable, but the knee-jerk reaction of disappointment underscores how sensitive the stock market is to Federal Reserve accommodation even when it’s not officially accommodation.
Retail Sales
Overall, the retail sales report was in-line. I think there was hope it would be a little higher. Excluding motor vehicles and gasoline, the number was slightly better than consensus.
Highlights
Building materials, which dovetails perfectly with the spike in mortgage refinancing and applications, and explains why Home Depot (HD) is hiring 80,000 spring workers, rose 2.1%.
Food and drinking place strong month to month and year to year reflects disposable income and underling confidence.
Lowlight
Clothing plunged, which some attribute to warm weather, and it also explains the -1.3% plunge in apparel prices from a year ago.
Bottom line, the report was a little disappointing, but it is still reflective of a smarter consuming public that is still buying.
January Retail Sales Report | M/M | Y/Y |
Retail & Food Services | 0.3 | 4.4 |
Ex-motor vehicle and gasoline | 0.4 | 3.3 |
Furniture | 0.6 | 1.8 |
Electronics | -0.5 | -3.2 |
Building materials and garden equipment | 2.1 | -1.3 |
Food & beverage | 0.2 | 2.3 |
Grocery stores | 0.3 | 2.5 |
Health care | -0.4 | -1.9 |
Gasoline | -0.5 | 10.4 |
Clothing | -3.1 | 0.0 |
Sporting goods | 0.1 | -1.8 |
General | 0.5 | 2.1 |
Department stores | 0.1 | -5.5 |
Miscellaneous | 2.3 | 9.5 |
Internet | 0.3 | 8.4 |
Food & drinking places | 1.2 | 7.4 |
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