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The earnings news since yesterday's close has been predominately better than expected, with luminaries such as Travelers (TRV), PepsiCo (PEP), Abbott Labs (ABT), Taiwan Semiconductor (TSM), GE Aerospace (GE), U.S. Bancorp (USB), and United Airlines (UAL) topping expectations.
That is a lot of good earnings news, but it frankly failed to move the market ahead of the retail sales and initial jobless claims reports at 8:30 a.m. ET. The equity futures market ahead of those reports was aligned with a relatively flat start for the major indices.
That changed somewhat following the release of the retail sales and initial jobless claims reports, which carried positive implications for the growth outlook.
Currently, the S&P 500 futures are up 11 points and are trading 0.2% above fair value, the Nasdaq 100 futures are up 74 points and are trading 0.3% above fair value, and the Dow Jones Industrial Average futures are up 15 and are trading roughly in-line with fair value.
Total retail sales increased 0.6% month-over-month in June (Briefing.com consensus: 0.2%) following a 0.9% decline in May. Excluding autos, retail sales rose 0.5% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.2% decline (from -0.3%) in May.
The key takeaway from the report is that the sales pickup was fairly broad-based across retail businesses following declines in April and May. Importantly, the June report also conveyed increases in discretionary spending activity, captured in areas like autos (+1.2%), apparel (+0.9%), building materials and garden equipment supplies (+0.9%), and food services and drinking places (+0.6%).
Initial jobless claims for the week ending July 12 decreased by 7,000 to 221,000 (Briefing.com consensus: 230,000). Continuing jobless claims for the week ending July 5 increased by 2,000 to 1.956 million.
The key takeaway from the report is the remarkably low level of initial jobless claims, which connotes limited layoff activity that fits hand-in-hand with good business conditions and a good outlook.
Separately, the Philadelphia Fed Index jumped to 15.9 in July (Briefing.com consensus: -0.2) from -4.0 in June, led by increases in the indexes for new orders, shipments, and the number of employees. However, there were also increases registered in the indexes for prices paid and prices received. The dividing line between expansion and contraction is 0.0.
Import prices in June were up 0.1%, as were nonfuel import prices. Export prices, meanwhile, jumped 0.5% month-over-month, as did non-agricultural export prices. On a year-over-year basis, import prices were down 0.2%, nonfuel import prices were up 1.2%, export prices increased 2.8%, and nonagricultural export prices jumped 2.9%.
The Treasury market, on balance, has handled this body of better-than-expected data quite well so far. The 2-yr note yield is up two basis points to 3.91% (having traded up to 3.93% earlier), and the 10-yr note yield is unchanged at 4.46% (having traded up to 4.49% earlier).
This calmness is important for the stock market, which is contending with stretched valuations, although valuations may feel a little less stretched this morning on the premise that this morning's data is supportive of the high earnings growth expectations embedded in premium multiples.
That's not to say the stock market won't face a consolidation period, but this type of data won't trigger a correction, and it will keep participants inclined to buy on weakness.
