By Carlos Guillen
Stock benchmarks are making slight moves to the upside so far into today's trading session, as a pair of mixed economic readings on retail sales and manufacturing activity in the New York area have slowed the upward momentum from the prior week.
Very concerning today was that retail sales data showed that the consumer decelerated its discretionary spending, certainly not boding well for second quarter GDP. According to the U.S. Census Bureau, retail sales during June increased year-over-year by 5.7 percent and increased month-over-month by 0.4 percent, worse than the Street's consensus estimate calling for a 0.7 percent month-over-month rise. Excluding automobile related revenues, retail sales increased year-over-year by 4.5 percent and remained unchanged month-over-month, worse than the Street's consensus estimate calling for a 0.4 percent month-over-month rise. Of the thirteen categories that make up the result, the highest gainers were led by a 2.4 percent increased in Furniture & home furnishing stores and by a 1.8 percent increase in Motor Vehicle & Parts. Given the importance of consumer spending, as it represents 70 percent of gross domestic product (GDP), this month's worse than expected gain in retail sales is serving to raise flags for second quarter GDP growth.
On the positive side, manufacturing in the New York region made a second encouraging uptick in July showing further expansion. According to the Federal Reserve Bank of New York, its general business conditions index July result landed at 9.5, higher than the Street's consensus estimate of 3.6, increasing from the 7.8 reached in June. Given that readings greater than zero signal expansion, this month's result indicated that the region covering New York, northern New Jersey, and southern Connecticut is on its second month of growth mode. Perhaps a bit negative, labor market conditions remained weak. Rising three points to 3.3, the index for number of employees showed only a slight increase in employment levels, while the average workweek index, still negative at -7.6, indicated that hours worked fell. Despite the uptick in the index, manufacturing conditions are still relatively weak, and this should not have any effect on the Fed's current course of actions, that is its bond buying program should remain intact.
Chinese Solar Flaring Up
By David Urani
The solar industry, particularly those companies in China, has been in somewhat of a tug-o-war of late due to scrutiny by the EU over dumping. Talks between China and the EU have preliminarily set out a potential rule whereby China would be allowed to sell 10GW of solar goods to the EU, but then would be subject to tariffs after that; yet recent reports suggest those talks may have stalled.
Nevertheless, while the talks with the EU go on China has just set out to boost its own domestic solar usage and that could well offset any shortfalls China may see in Europe. China's new plans are ambitious, aiming to increase the amount of solar power installed in the country by five times to 35 GW. That makes for 10GW of additional solar capacity per year (would match that preliminary EU tariff threshold).
Of course, the industry is already dealing with an oversupply issue that has made it somewhat tough to turn a profit these days, and new government investment in China will help alleviate that but they have other incentives ready as well. China also says that it will offer tax breaks for acquisitions and mergers within the industry, as well as for restructuring plans, as a way to facilitate consolidation in overall production capacity and to reduce the oversaturation in the market.
Naturally the news is a big positive for the industry, with Chinese solar names like Yingli (NYSE:YGE), Trina (NYSE:TSL), Canadian Solar (CSIQ, which is actually Chinese despite its name), JinkoSolar (NYSE:JKS), JA Solar (NASDAQ:JASO), and LDK (NYSE:LDK) each up more than 10% mid-day.
The Guggenheim Solar ETF (NYSEARCA:TAN), which tracks several global solar companies, is up 8% breaking to a new 52-week high.