Mixed U.S. Retail Sales Reading

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A mixed U.S. Retail Sales reading and more weakness in Chinese stocks provide the backdrop for today's session, with the market effectively in a wait-and-see mode ahead of the Fed announcement later this week.

The August Retail Sales report came in mixed, with 'headline' growth rate coming in short of estimates but the report's internals showing improved momentum and the prior-month's numbers getting revised higher. The retail sales growth rate excluding gasoline and automobile sales were also short of estimates, but the 'core' piece of this report that feeds directly into the government's GDP calculation came in better than expected.

This 'core' retail sales component, called the 'control group,' excludes construction materials in addition to autos and gasoline. The improving 'control group' numbers bode well for GDP estimates for the current period. All in all, this is a good-enough report about the health of U.S. households, notwithstanding the 'headline' miss.

From the Fed's perspective, this Retail Sales report should be reassuring enough about the U.S. households' ability to withstand lift-off on Thursday. But they didn't need to see this report to reach that conclusion - plenty of other readings of the economy confirm that the economy is in good shape. The uncertainty in the market about what the Fed will or will not announce on Thursday has to do with what's happening internationally, particularly in China.

To underscore the unsettled Chinese situation, stocks in that country were down again today for a second day in a row, with the Shanghai Composite index barely able to maintain the 3000 level. I don't think the Fed should delay the lift-off because of developments in China, but many in the market don't see it that way.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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