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The reported growth scare from last week is, well, looking less scary now. That view started to resonate with last week's initial jobless claims report, but today's news has been like turning on the light in a dark bedroom to discover that there are no scary monsters under the bed after all.
There might be some bugs, evidenced by the New York Fed's Empire State Manufacturing Index and the Philadelphia Fed's Manufacturing Index for August, which were both in a state of contraction, but some comments from Walmart (WMT), the latest initial jobless claims report, and the July Retail Sales report have slayed the monsters.
Briefly, Walmart reported better than expected fiscal Q2 earnings results, replete with a robust 4.2% increase in U.S. comparable store sales. The kicker is that the retail behemoth said consumers are still value seeking, but that it does not see any additional fraying of consumer health.
The July Retail Sales Report seemingly corroborates that view.
Total retail sales were up 1.0% month-over-month in July (Briefing.com consensus 0.3%) following a downwardly revised 0.2% decline (from 0.0%) in June. Excluding autos, retail sales rose 0.4% following an upwardly revised 0.5% increase (from 0.4%) in June.
The key takeaway from the report is that the increase in retail sales outpaced the rate of inflation in July, which connotes an understanding that the improvement in retail sales was driven by increased demand on top of price increases.
Some better feelings about the labor market could be behind that demand.
Initial jobless claims for the week ending August 10 decreased by 7,000 to 227,000. Recall that initial jobless claims hit 250,000 just a few weeks ago. Continuing jobless claims for the week ending August 3 decreased by 7,000 to 1.864 million.
The key takeaway from the report is that initial claims remain well below levels typically associated with recession conditions.
The other piece of this morning's economic puzzle was the July Import-Export Price Index. Import prices were up 0.1% month-over-month. Excluding fuel, they were also up 0.1%. Export prices increased 0.7% month-over-month. Excluding agricultural products, export prices were up 1.0%.
The key takeaway from this report is that import and export prices were well behaved on a year-over-year basis. Import prices were up 1.6% (+1.2% excluding fuel) and export prices were up 1.4% (+2.3% excluding agricultural products).
The Treasury market has provided a nice tell on the growth monsters not being what participants thought they were. The 2-yr note yield is up 14 basis points to 4.09% and the 10-yr note yield is up 11 basis points to 3.93%. Separately, the probability of a 50 basis points rate cut at the September FOMC meeting has shrunk to 25.5% from 55% a week ago.
To be fair, growth isn't gangbusters. Deere (DE) spoke of weak market conditions after reporting better than expected earnings and Cisco (CSCO) said, after also reporting better than expected earnings, that it will be undertaking a restructuring that will impact approximately 7% of its workforce.
Both stocks are indicated higher in pre-market trading, but that is true of most stocks, including Nike (NKE) and Ulta Beauty (ULTA). The former is gaining on the news of Pershing Square starting a new position while the latter is surging on the news of Berkshire Hathaway taking a new position.
Currently, the S&P 500 futures are up 51 points and are trading 0.9% above fair value, the Nasdaq 100 futures are up 220 points and are trading 1.1% above fair value, and the Dow Jones Industrial Average futures are up 382 points and are trading 0.9% above fair value.
In other words, the lights are on and the growth story isn't as scary as previously thought.
