Encouraging retails sales reading was accompanied by
disappointing inventory growth and the two left the benchmarks
struggling for definite direction yesterday. While the Dow managed
to chalk up paltry gains, S&P 500 and Nasdaq slipped
marginally. Negligible movement in the benchmarks meant it was
another day of low volumes and Reuters noted that investors are
calling this a 'fatigued market'.
The Dow Jones Industrial Average (DJI) ended just 2.71 points or
0.02% higher at 13,172.14. The Standard & Poor 500 (S&P
500) slipped a negligible 0.01% or 0.18 point to finish yesterday's
trading session at 1,403.93. The tech-laden Nasdaq Composite Index
lost 0.2% to end at 3,016.98. The fear-gauge CBOE Volatility Index
(VIX) jumped 8.4% to settle at 14.85. Volumes were yet again low
with consolidated volumes of roughly 5.16 billion shares on the New
York Stock Exchange, Nasdaq and American Stock Exchange, lower than
last year's daily average of 7.84 billion shares. Advancing and
declining stock on the NYSE were almost even; as for 47% stocks
that gained, 49% stocks closed lower.
Even in the absence of few negatives yesterday, the fear-gauge
index made a sharp movement upward. However, one might not read too
much into it, as on Monday the index had dropped to five-year low
while the markets closed in the red. Generally, The VIX moves in
the opposite direction of the market and a drop in the fear-gauge
index reflects improving investor confidence and vice versa. On
Monday, certain market onlookers had opined that investors were not
too bothered by negatives.
Low volumes are another trend that the Street is witnessing over
the past few days. On Tuesday also, volumes were sharply lower than
the average. A cautious stance has largely prevented investors from
betting big. Strategists also opined that volumes will pick up only
after investors return from summer holidays.
Investors are awaiting concrete action from the central banks, and
they have focused less and less on the limited number of headlines.
Yesterday too, benchmarks were reluctant to move on either side
following surprisingly encouraging retail sales data and dismal
growth in inventories.
Coming to the retail sales data, the Commerce Department reported
that retail sales had increased 0.8% in July. This was the best
jump since February this year. Also, the 0.8% jump far outpaced
consensus estimates of a 0.3% gain. Separately, the Labor
Department reported that U.S. producer prices index had increased
0.3% in July, up from the 0.1% gain in June and higher than
consensus estimates of a 0.2% increase.
Retail sales data was encouraging news not only for the retail
sector but for the overall economy as well. Retail stocks
registered gains yesterday and the SPDR S&P Retail (XRT) was up
0.2%. Among retailers, Target Corporation (NYSE:
), PriceSmart, Inc. (NASDAQ:
), Wal-Mart Stores, Inc. (NYSE:
), Macy's, Inc. (NYSE:
) and the The Bon-Ton Stores, Inc. (NASDAQ:
) jumped 1.4%, 0.4%, 0.8%, 1.0% and 3.1%, respectively. Another
retailer, The Home Depot, Inc. (NYSE:
) jumped 3.6%. Not only did the company's quarterly results surpass
Street's estimates, the company also upped its guidance.
However the positive mood emanating from this data was offset by
another on business inventories. The Commerce Department noted a
mere 0.1% rise in business inventories in June to $1.58 trillion.
This was lower than May's growth of 0.3%, but was in line with
consensus estimates. Moreover, the report also noted a 1.1% drop in
sales, the largest decline since March 2009.
BON-TON STORES (BONT): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
PRICESMART INC (PSMT): Free Stock Analysis
TARGET CORP (TGT): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
To read this article on Zacks.com click here.