The overall tone of today's news flow, both on the home front as
well as from Europe, is decidedly favorable. This should help
stocks reverse the persistent downtrend of recent sessions, even if
it lacks in staying power.
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Today's positive-looking data out of Europe should help offset,
howsoever temporarily, the constant drumbeat of negative
Greece-inspired headlines. It is not often that one would describe
'zero GDP growth' as positive news, but that's exactly what we have
in today's first quarter GDP report for the Euro-zone.
The report defied expectations of a back-to-back second quarter of
negative growth to come in at 'unchanged' or '0%' growth. Italy and
Spain are firmly in a recession, but it was the strength in the
German economy that pulled the Euro-zone above the negative
Economic data on the home front is also reassuring, with an in-line
April Retail Sales reading, a benign looking inflation report, and
a better-than-expected Empire State regional manufacturing survey.
Growth in Retail Sales decelerated from the preceding month's
strong pace, mostly due to the earlier Easter holiday this year,
but that was expected.
Momentum on the Retail Sales front is important as it serves as
proxy for consumer spending, which accounted for the bulk of growth
in the first quarter GDP. Despite the lower growth pace, today's
Retail Sales report is consistent with consumer spending growth
along the lines of what we saw in the first quarter GDP.
The April Retail Sales reading is a net positive for the market
today, with both the 'headline' and 'core' readings matching
expectations following the exceptionally strong reading in March.
Retail Sales were up 0.1% in April on a 'headline' basis vs. up
0.7% in March. The 'core' reading, which strips out auto and
gasoline sales, was also up 0.1% in April vs. up 0.8% in March.
The Retail Sales report is admittedly not a perfect proxy for
'real' consumer spending since this non-inflation-adjusted measure
only includes 'goods' sales at retail establishments and leaves out
the much larger consumer outlays on 'services.' But it nevertheless
provides valuable clues to trends in consumer spending, which is
the backbone of the U.S. economy.
The Consumer Price Index (CPI) for April came broadly in-line with
market expectations, 'unchanged' on the 'headline' after March's
0.3% increase. 'Core' CPI, which strips out food and energy, also
matched expectations, was up 0.2% after March's increase of the
same amount. The year-over-year readings were broadly in-line with
expectations as well. The not-so-hot 'core' reading will keep hopes
of further Fed support alive should economic growth start
On the earnings front,
) matched earnings expectations, but missed the top-line, while
Dick's Sporting Goods
) came out with a solid positive beat.
) handily beat earnings expectations after the close on Monday,
though its top-line came short of expectations.
This is a big news day, with a lot of economic headlines about the
domestic and European economies. But the pick of the day has got to
be the surprising resilience in the German economy which
single-handedly pulled the aggregate Euro-zone economy out of
reporting a negative GDP read.