This week's data measuring the state of consumers could set up to stop stocks. We have four key consumer centered data points set for reporting. Consumer discretionary shares may be at risk, given their significant gains over the last three months. The Consumer Discretionary Select Sector SPDR (NYSEARCA:XLY) has gained 9.8% since July 26, when the ECB chief sparked shares globally. The SPDR S&P 500 (NYSEARCA:SPY) is up a lesser 7.7% during that span through September 21.
In my view, the week's consumer data contains the most dynamite capable of shaking up the state of stocks generally. Tuesday offers the Conference Board's Consumer Confidence Index, which in my opinion, is the favorite sentiment measure of investors. When it was last reported, the market felt the heat of a drastic 4.8 point decline. This month, economists see improvement to 64.8, from 60.6, according to Bloomberg's survey. Thursday offers the weekly Bloomberg Consumer Comfort Index, but that measure improved last week. Still, because it is a weekly measure, it may enhance the impact of the Conference Board's report. I am expecting the Conference Board's measure to mark improvement, so be at ease.
Friday offers two more consumer sensitive data points. The Reuters University of Michigan Consumer Sentiment Index should be overshadowed by the real consumer spending data reported the same day in the Personal Income and Outlays Report. The good news is that consumer spending is seen climbing 0.5% in August, following the 0.4% increase marked for July. But that figure could be impacted by prices, since the PCE Price Index is expected to also increase by 0.5%. The Core PCE Price Index is forecast to increase by a lesser degree, at +0.1%. This means spending ex-pricing, could be stagnant -- a real stopper for stocks.
The performance of the shares of major consumer sensitive stocks, including Wal-Mart (NYSE:WMT), Amazon.com (NASDAQ:AMZN) and Sears (SHLD), will likely weigh on this data. Based on the chart below in isolation, it would look like Amazon.com is at most risk from within this group. However, the fate of all consumer dependent players will hang in the balance, as the market weighs the slew of consumer relative data coming our way.
Obviously, the valuations and the corporate strategies of these individual corporates play important roles in their reactions to news. However, Wal-Mart, in my view, is increasingly trading as "the market" for consumer sensitives because of its major market share. Amazon, due to its valuation, remains "at risk," and Sears, because of its troubles, remains sensitive to poor economic data drivers.
Charts from Yahoo Finance
My view is that the sentiment measures will not drive significant trading through the start of the week. However, I see the consumer spending data coming in soft on Friday when taking pricing changes into account. I believe that the initial impact of the release will not drive immediate downward pressure on the stocks, but that as the information is better understood and as companies report individually this coming quarter, we will see the latest three months of gains undermined.